Correlation Between Stepan and Aterian
Can any of the company-specific risk be diversified away by investing in both Stepan and Aterian 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 Aterian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Aterian, you can compare the effects of market volatilities on Stepan and Aterian 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 Aterian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Aterian.
Diversification Opportunities for Stepan and Aterian
Very good diversification
The 3 months correlation between Stepan and Aterian is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Aterian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aterian 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 Aterian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aterian has no effect on the direction of Stepan i.e., Stepan and Aterian go up and down completely randomly.
Pair Corralation between Stepan and Aterian
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Aterian. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 3.01 times less risky than Aterian. The stock trades about -0.02 of its potential returns per unit of risk. The Aterian is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 378.00 in Aterian on September 2, 2024 and sell it today you would lose (105.00) from holding Aterian or give up 27.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Aterian
Performance |
| Timeline |
| Stepan Company |
| Aterian |
Stepan and Aterian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Aterian
The main advantage of trading using opposite Stepan and Aterian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Aterian 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 Aterian will offset losses from the drop in Aterian's long position.| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
| Aterian vs. Energy Focu | Aterian vs. Flexsteel Industries | Aterian vs. Ethan Allen Interiors | Aterian vs. FGI Industries |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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