Correlation Between Stepan and National Beverage
Can any of the company-specific risk be diversified away by investing in both Stepan and National Beverage 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 National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and National Beverage Corp, you can compare the effects of market volatilities on Stepan and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and National Beverage.
Diversification Opportunities for Stepan and National Beverage
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stepan and National is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Stepan i.e., Stepan and National Beverage go up and down completely randomly.
Pair Corralation between Stepan and National Beverage
Considering the 90-day investment horizon Stepan is expected to generate 21.87 times less return on investment than National Beverage. In addition to that, Stepan is 1.48 times more volatile than National Beverage Corp. It trades about 0.0 of its total potential returns per unit of risk. National Beverage Corp is currently generating about 0.07 per unit of volatility. If you would invest 4,556 in National Beverage Corp on August 26, 2024 and sell it today you would earn a total of 231.00 from holding National Beverage Corp or generate 5.07% 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. National Beverage Corp
Performance |
| Timeline |
| Stepan Company |
| National Beverage Corp |
Stepan and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and National Beverage
The main advantage of trading using opposite Stepan and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.The idea behind Stepan Company and National Beverage Corp 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.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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