Correlation Between Stepan and ESGL Holdings
Can any of the company-specific risk be diversified away by investing in both Stepan and ESGL Holdings 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 ESGL Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and ESGL Holdings Limited, you can compare the effects of market volatilities on Stepan and ESGL Holdings 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 ESGL Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and ESGL Holdings.
Diversification Opportunities for Stepan and ESGL Holdings
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Stepan and ESGL is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited 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 ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of Stepan i.e., Stepan and ESGL Holdings go up and down completely randomly.
Pair Corralation between Stepan and ESGL Holdings
Considering the 90-day investment horizon Stepan is expected to generate 1.7 times less return on investment than ESGL Holdings. But when comparing it to its historical volatility, Stepan Company is 5.89 times less risky than ESGL Holdings. It trades about 0.13 of its potential returns per unit of risk. ESGL Holdings Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1.85 in ESGL Holdings Limited on September 2, 2024 and sell it today you would lose (0.16) from holding ESGL Holdings Limited or give up 8.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 85.71% |
| Values | Daily Returns |
Stepan Company vs. ESGL Holdings Limited
Performance |
| Timeline |
| Stepan Company |
| ESGL Holdings Limited |
Stepan and ESGL Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and ESGL Holdings
The main advantage of trading using opposite Stepan and ESGL Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, ESGL Holdings 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 ESGL Holdings will offset losses from the drop in ESGL Holdings' long position.| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
| ESGL Holdings vs. East Africa Metals | ESGL Holdings vs. Stepan Company | ESGL Holdings vs. Aerofoam Metals | ESGL Holdings vs. Barrick Gold 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |