Correlation Between Stepan and Gap,
Can any of the company-specific risk be diversified away by investing in both Stepan and Gap, 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 Gap, into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and The Gap,, you can compare the effects of market volatilities on Stepan and Gap, 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 Gap,. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Gap,.
Diversification Opportunities for Stepan and Gap,
Weak diversification
The 3 months correlation between Stepan and Gap, is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Stepan i.e., Stepan and Gap, go up and down completely randomly.
Pair Corralation between Stepan and Gap,
Considering the 90-day investment horizon Stepan Company is expected to generate 0.64 times more return on investment than Gap,. However, Stepan Company is 1.57 times less risky than Gap,. It trades about -0.03 of its potential returns per unit of risk. The Gap, is currently generating about -0.03 per unit of risk. If you would invest 8,462 in Stepan Company on September 1, 2024 and sell it today you would lose (772.00) from holding Stepan Company or give up 9.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. The Gap,
Performance |
| Timeline |
| Stepan Company |
| Gap, |
Stepan and Gap, Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Gap,
The main advantage of trading using opposite Stepan and Gap, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Gap, 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 Gap, will offset losses from the drop in Gap,'s long position.The idea behind Stepan Company and The Gap, 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |