Correlation Between Stepan and Grocery Outlet
Can any of the company-specific risk be diversified away by investing in both Stepan and Grocery Outlet 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 Grocery Outlet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Grocery Outlet Holding, you can compare the effects of market volatilities on Stepan and Grocery Outlet 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 Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Grocery Outlet.
Diversification Opportunities for Stepan and Grocery Outlet
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stepan and Grocery is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding 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 Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of Stepan i.e., Stepan and Grocery Outlet go up and down completely randomly.
Pair Corralation between Stepan and Grocery Outlet
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Grocery Outlet. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.68 times less risky than Grocery Outlet. The stock trades about -0.03 of its potential returns per unit of risk. The Grocery Outlet Holding is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,108 in Grocery Outlet Holding on September 2, 2024 and sell it today you would lose (8.00) from holding Grocery Outlet Holding or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Grocery Outlet Holding
Performance |
| Timeline |
| Stepan Company |
| Grocery Outlet Holding |
Stepan and Grocery Outlet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Grocery Outlet
The main advantage of trading using opposite Stepan and Grocery Outlet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Grocery Outlet 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 Grocery Outlet will offset losses from the drop in Grocery Outlet's long position.| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
| Grocery Outlet vs. Natural Grocers by | Grocery Outlet vs. Village Super Market | Grocery Outlet vs. Ingles Markets Incorporated | Grocery Outlet vs. Ocado Group plc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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