Correlation Between Stepan and Aquestive Therapeutics
Can any of the company-specific risk be diversified away by investing in both Stepan and Aquestive Therapeutics 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 Stepan and Aquestive Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Aquestive Therapeutics, you can compare the effects of market volatilities on Stepan and Aquestive Therapeutics 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 Stepan with a short position of Aquestive Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Aquestive Therapeutics.
Diversification Opportunities for Stepan and Aquestive Therapeutics
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Stepan and Aquestive is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Aquestive Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquestive Therapeutics and Stepan 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 Stepan Company are associated (or correlated) with Aquestive Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquestive Therapeutics has no effect on the direction of Stepan i.e., Stepan and Aquestive Therapeutics go up and down completely randomly.
Pair Corralation between Stepan and Aquestive Therapeutics
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Aquestive Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 2.82 times less risky than Aquestive Therapeutics. The stock trades about -0.03 of its potential returns per unit of risk. The Aquestive Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 93.00 in Aquestive Therapeutics on September 3, 2024 and sell it today you would earn a total of 416.00 from holding Aquestive Therapeutics or generate 447.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Aquestive Therapeutics
Performance |
| Timeline |
| Stepan Company |
| Aquestive Therapeutics |
Stepan and Aquestive Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Aquestive Therapeutics
The main advantage of trading using opposite Stepan and Aquestive Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Aquestive Therapeutics 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 Aquestive Therapeutics will offset losses from the drop in Aquestive Therapeutics' long position.The idea behind Stepan Company and Aquestive Therapeutics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Aquestive Therapeutics vs. Connect Biopharma Holdings | Aquestive Therapeutics vs. Acumen Pharmaceuticals | Aquestive Therapeutics vs. Nuvation Bio | Aquestive Therapeutics vs. Eledon Pharmaceuticals |
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 Stocks Directory module to find actively traded stocks across global markets.
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