Correlation Between Stepan and EastGroup Properties
Can any of the company-specific risk be diversified away by investing in both Stepan and EastGroup Properties 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 EastGroup Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and EastGroup Properties, you can compare the effects of market volatilities on Stepan and EastGroup Properties 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 EastGroup Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and EastGroup Properties.
Diversification Opportunities for Stepan and EastGroup Properties
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stepan and EastGroup is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties 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 EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of Stepan i.e., Stepan and EastGroup Properties go up and down completely randomly.
Pair Corralation between Stepan and EastGroup Properties
Considering the 90-day investment horizon Stepan is expected to generate 5.8 times less return on investment than EastGroup Properties. In addition to that, Stepan is 1.2 times more volatile than EastGroup Properties. It trades about 0.04 of its total potential returns per unit of risk. EastGroup Properties is currently generating about 0.27 per unit of volatility. If you would invest 15,871 in EastGroup Properties on November 9, 2024 and sell it today you would earn a total of 1,467 from holding EastGroup Properties or generate 9.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. EastGroup Properties
Performance |
| Timeline |
| Stepan Company |
| EastGroup Properties |
Stepan and EastGroup Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and EastGroup Properties
The main advantage of trading using opposite Stepan and EastGroup Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, EastGroup Properties 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 EastGroup Properties will offset losses from the drop in EastGroup Properties' long position.The idea behind Stepan Company and EastGroup Properties 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.| EastGroup Properties vs. Terreno Realty | EastGroup Properties vs. Plymouth Industrial REIT | EastGroup Properties vs. LXP Industrial Trust | EastGroup Properties vs. First Industrial Realty |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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