Correlation Between Stepan and Australian Oilseeds
Can any of the company-specific risk be diversified away by investing in both Stepan and Australian Oilseeds 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 Australian Oilseeds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Australian Oilseeds Holdings, you can compare the effects of market volatilities on Stepan and Australian Oilseeds 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 Australian Oilseeds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Australian Oilseeds.
Diversification Opportunities for Stepan and Australian Oilseeds
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stepan and Australian is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Australian Oilseeds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Oilseeds 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 Australian Oilseeds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Oilseeds has no effect on the direction of Stepan i.e., Stepan and Australian Oilseeds go up and down completely randomly.
Pair Corralation between Stepan and Australian Oilseeds
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Australian Oilseeds. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 10.79 times less risky than Australian Oilseeds. The stock trades about -0.05 of its potential returns per unit of risk. The Australian Oilseeds Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2.49 in Australian Oilseeds Holdings on November 30, 2024 and sell it today you would earn a total of 1.01 from holding Australian Oilseeds Holdings or generate 40.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 73.17% |
| Values | Daily Returns |
Stepan Company vs. Australian Oilseeds Holdings
Performance |
| Timeline |
| Stepan Company |
| Australian Oilseeds |
Stepan and Australian Oilseeds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Australian Oilseeds
The main advantage of trading using opposite Stepan and Australian Oilseeds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Australian Oilseeds 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 Australian Oilseeds will offset losses from the drop in Australian Oilseeds' long position.The idea behind Stepan Company and Australian Oilseeds Holdings 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.| Australian Oilseeds vs. Sphere 3D Corp | Australian Oilseeds vs. Air Lease | Australian Oilseeds vs. Mayfair Gold Corp | Australian Oilseeds vs. Paysafe |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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