Correlation Between Stepan and Opthea
Can any of the company-specific risk be diversified away by investing in both Stepan and Opthea 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 Opthea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Opthea, you can compare the effects of market volatilities on Stepan and Opthea 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 Opthea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Opthea.
Diversification Opportunities for Stepan and Opthea
Pay attention - limited upside
The 3 months correlation between Stepan and Opthea is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Opthea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opthea 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 Opthea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opthea has no effect on the direction of Stepan i.e., Stepan and Opthea go up and down completely randomly.
Pair Corralation between Stepan and Opthea
Considering the 90-day investment horizon Stepan Company is expected to generate 0.48 times more return on investment than Opthea. However, Stepan Company is 2.07 times less risky than Opthea. It trades about 0.08 of its potential returns per unit of risk. Opthea is currently generating about -0.22 per unit of risk. If you would invest 7,246 in Stepan Company on September 5, 2024 and sell it today you would earn a total of 272.00 from holding Stepan Company or generate 3.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Stepan Company vs. Opthea
Performance |
| Timeline |
| Stepan Company |
| Opthea |
Stepan and Opthea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Opthea
The main advantage of trading using opposite Stepan and Opthea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Opthea 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 Opthea will offset losses from the drop in Opthea's long position.The idea behind Stepan Company and Opthea 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.| Opthea vs. Aegon NV ADR | Opthea vs. Assurant | Opthea vs. Modine Manufacturing | Opthea vs. Rivian Automotive |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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