Correlation Between Quaker Chemical and Stepan
Can any of the company-specific risk be diversified away by investing in both Quaker Chemical 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 Quaker Chemical and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quaker Chemical and Stepan Company, you can compare the effects of market volatilities on Quaker Chemical 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 Quaker Chemical with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quaker Chemical and Stepan.
Diversification Opportunities for Quaker Chemical and Stepan
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Quaker and Stepan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical i.e., Quaker Chemical and Stepan go up and down completely randomly.
Pair Corralation between Quaker Chemical and Stepan
Considering the 90-day investment horizon Quaker Chemical is expected to generate 1.42 times more return on investment than Stepan. However, Quaker Chemical is 1.42 times more volatile than Stepan Company. It trades about 0.09 of its potential returns per unit of risk. Stepan Company is currently generating about 0.1 per unit of risk. If you would invest 15,739 in Quaker Chemical on August 23, 2024 and sell it today you would earn a total of 906.00 from holding Quaker Chemical or generate 5.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quaker Chemical vs. Stepan Company
Performance |
| Timeline |
| Quaker Chemical |
| Stepan Company |
Quaker Chemical and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quaker Chemical and Stepan
The main advantage of trading using opposite Quaker Chemical and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical 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.| Quaker Chemical vs. Minerals Technologies | Quaker Chemical vs. Innospec | Quaker Chemical vs. H B Fuller | Quaker Chemical vs. Cabot |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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