Correlation Between Old Republic and Stepan
Can any of the company-specific risk be diversified away by investing in both Old Republic 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 Old Republic and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Republic International and Stepan Company, you can compare the effects of market volatilities on Old Republic 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 Old Republic with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Stepan.
Diversification Opportunities for Old Republic and Stepan
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Old and Stepan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and Stepan go up and down completely randomly.
Pair Corralation between Old Republic and Stepan
Considering the 90-day investment horizon Old Republic International is expected to generate 0.47 times more return on investment than Stepan. However, Old Republic International is 2.11 times less risky than Stepan. It trades about 0.46 of its potential returns per unit of risk. Stepan Company is currently generating about 0.14 per unit of risk. If you would invest 3,493 in Old Republic International on September 1, 2024 and sell it today you would earn a total of 404.00 from holding Old Republic International or generate 11.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Republic International vs. Stepan Company
Performance |
| Timeline |
| Old Republic Interna |
| Stepan Company |
Old Republic and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Republic and Stepan
The main advantage of trading using opposite Old Republic and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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.| Old Republic vs. Selective Insurance Group | Old Republic vs. Aquagold International | Old Republic vs. Thrivent High Yield | Old Republic vs. Morningstar Unconstrained Allocation |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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