Correlation Between Stepan and Electrovaya Common
Can any of the company-specific risk be diversified away by investing in both Stepan and Electrovaya Common 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 Electrovaya Common into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Electrovaya Common Shares, you can compare the effects of market volatilities on Stepan and Electrovaya Common 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 Electrovaya Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Electrovaya Common.
Diversification Opportunities for Stepan and Electrovaya Common
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stepan and Electrovaya is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Electrovaya Common Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrovaya Common Shares 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 Electrovaya Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrovaya Common Shares has no effect on the direction of Stepan i.e., Stepan and Electrovaya Common go up and down completely randomly.
Pair Corralation between Stepan and Electrovaya Common
Considering the 90-day investment horizon Stepan is expected to generate 4.92 times less return on investment than Electrovaya Common. But when comparing it to its historical volatility, Stepan Company is 1.95 times less risky than Electrovaya Common. It trades about 0.09 of its potential returns per unit of risk. Electrovaya Common Shares is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 210.00 in Electrovaya Common Shares on August 30, 2024 and sell it today you would earn a total of 50.00 from holding Electrovaya Common Shares or generate 23.81% 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. Electrovaya Common Shares
Performance |
| Timeline |
| Stepan Company |
| Electrovaya Common Shares |
Stepan and Electrovaya Common Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Electrovaya Common
The main advantage of trading using opposite Stepan and Electrovaya Common positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Electrovaya Common 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 Electrovaya Common will offset losses from the drop in Electrovaya Common's long position.The idea behind Stepan Company and Electrovaya Common Shares 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.| Electrovaya Common vs. Bloom Energy Corp | Electrovaya Common vs. Microvast Holdings | Electrovaya Common vs. Solid Power | Electrovaya Common vs. Enovix Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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