Correlation Between Stepan and First Ship
Can any of the company-specific risk be diversified away by investing in both Stepan and First Ship 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 First Ship into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and First Ship Lease, you can compare the effects of market volatilities on Stepan and First Ship 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 First Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and First Ship.
Diversification Opportunities for Stepan and First Ship
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Stepan and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and First Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Ship Lease 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 First Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Ship Lease has no effect on the direction of Stepan i.e., Stepan and First Ship go up and down completely randomly.
Pair Corralation between Stepan and First Ship
Considering the 90-day investment horizon Stepan Company is expected to under-perform the First Ship. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.5 times less risky than First Ship. The stock trades about -0.03 of its potential returns per unit of risk. The First Ship Lease is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2.50 in First Ship Lease on September 12, 2024 and sell it today you would earn a total of 1.50 from holding First Ship Lease or generate 60.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. First Ship Lease
Performance |
| Timeline |
| Stepan Company |
| First Ship Lease |
Stepan and First Ship Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and First Ship
The main advantage of trading using opposite Stepan and First Ship positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, First Ship 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 First Ship will offset losses from the drop in First Ship's long position.The idea behind Stepan Company and First Ship Lease 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.| First Ship vs. United Rentals | First Ship vs. Ashtead Gro | First Ship vs. AerCap Holdings NV | First Ship vs. Fortress Transp Infra |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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