Correlation Between Stepan and Flexible Solutions
Can any of the company-specific risk be diversified away by investing in both Stepan and Flexible Solutions 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 Flexible Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Flexible Solutions International, you can compare the effects of market volatilities on Stepan and Flexible Solutions 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 Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Flexible Solutions.
Diversification Opportunities for Stepan and Flexible Solutions
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Stepan and Flexible is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Stepan i.e., Stepan and Flexible Solutions go up and down completely randomly.
Pair Corralation between Stepan and Flexible Solutions
Considering the 90-day investment horizon Stepan Company is expected to generate 0.52 times more return on investment than Flexible Solutions. However, Stepan Company is 1.91 times less risky than Flexible Solutions. It trades about 0.11 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.0 per unit of risk. If you would invest 7,387 in Stepan Company on August 28, 2024 and sell it today you would earn a total of 393.00 from holding Stepan Company or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Flexible Solutions Internation
Performance |
| Timeline |
| Stepan Company |
| Flexible Solutions |
Stepan and Flexible Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Flexible Solutions
The main advantage of trading using opposite Stepan and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Flexible Solutions 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.The idea behind Stepan Company and Flexible Solutions International 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.| Flexible Solutions vs. Oil Dri | Flexible Solutions vs. H B Fuller | Flexible Solutions vs. Northern Technologies | Flexible Solutions vs. Cabot |
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.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |