Correlation Between Eastern and Stepan
Can any of the company-specific risk be diversified away by investing in both Eastern and Stepan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Eastern and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Stepan Company, you can compare the effects of market volatilities on Eastern and Stepan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Eastern with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Stepan.
Diversification Opportunities for Eastern and Stepan
Good diversification
The 3 months correlation between Eastern and Stepan is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Eastern is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Eastern Co are associated (or correlated) with Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Eastern i.e., Eastern and Stepan go up and down completely randomly.
Pair Corralation between Eastern and Stepan
Considering the 90-day investment horizon Eastern Co is expected to generate 1.66 times more return on investment than Stepan. However, Eastern is 1.66 times more volatile than Stepan Company. It trades about 0.04 of its potential returns per unit of risk. Stepan Company is currently generating about -0.03 per unit of risk. If you would invest 2,085 in Eastern Co on September 1, 2024 and sell it today you would earn a total of 787.00 from holding Eastern Co or generate 37.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. Stepan Company
Performance |
| Timeline |
| Eastern |
| Stepan Company |
Eastern and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Stepan
The main advantage of trading using opposite Eastern and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern position performs unexpectedly, Stepan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Stepan will offset losses from the drop in Stepan's long position.| Eastern vs. Timken Company | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF | Eastern vs. Kennametal |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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