Correlation Between International Flavors and Stepan
Can any of the company-specific risk be diversified away by investing in both International Flavors 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 International Flavors and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Flavors Fragrances and Stepan Company, you can compare the effects of market volatilities on International Flavors 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 International Flavors with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Flavors and Stepan.
Diversification Opportunities for International Flavors and Stepan
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Stepan is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and International Flavors 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 International Flavors Fragrances 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 International Flavors i.e., International Flavors and Stepan go up and down completely randomly.
Pair Corralation between International Flavors and Stepan
Considering the 90-day investment horizon International Flavors Fragrances is expected to generate 0.98 times more return on investment than Stepan. However, International Flavors Fragrances is 1.02 times less risky than Stepan. It trades about -0.05 of its potential returns per unit of risk. Stepan Company is currently generating about -0.13 per unit of risk. If you would invest 8,943 in International Flavors Fragrances on September 13, 2024 and sell it today you would lose (133.00) from holding International Flavors Fragrances or give up 1.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Flavors Fragranc vs. Stepan Company
Performance |
| Timeline |
| International Flavors |
| Stepan Company |
International Flavors and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Flavors and Stepan
The main advantage of trading using opposite International Flavors and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Flavors 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.| International Flavors vs. LyondellBasell Industries NV | International Flavors vs. Cabot | International Flavors vs. Westlake Chemical | International Flavors vs. Air Products and |
| Stepan vs. LyondellBasell Industries NV | Stepan vs. International Flavors Fragrances | Stepan vs. Cabot | Stepan vs. Westlake Chemical |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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