Correlation Between Stepan and Atmos Energy
Can any of the company-specific risk be diversified away by investing in both Stepan and Atmos Energy 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 Atmos Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Atmos Energy, you can compare the effects of market volatilities on Stepan and Atmos Energy 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 Atmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Atmos Energy.
Diversification Opportunities for Stepan and Atmos Energy
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stepan and Atmos is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Stepan i.e., Stepan and Atmos Energy go up and down completely randomly.
Pair Corralation between Stepan and Atmos Energy
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Atmos Energy. In addition to that, Stepan is 1.78 times more volatile than Atmos Energy. It trades about -0.13 of its total potential returns per unit of risk. Atmos Energy is currently generating about 0.29 per unit of volatility. If you would invest 14,064 in Atmos Energy on November 29, 2024 and sell it today you would earn a total of 856.50 from holding Atmos Energy or generate 6.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Atmos Energy
Performance |
| Timeline |
| Stepan Company |
| Atmos Energy |
Stepan and Atmos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Atmos Energy
The main advantage of trading using opposite Stepan and Atmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Atmos Energy 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 Atmos Energy will offset losses from the drop in Atmos Energy's long position.The idea behind Stepan Company and Atmos Energy 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.| Atmos Energy vs. NewJersey Resources | Atmos Energy vs. One Gas | Atmos Energy vs. Northwest Natural Gas | Atmos Energy vs. Chesapeake Utilities |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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