Correlation Between Stepan and Caravelle International
Can any of the company-specific risk be diversified away by investing in both Stepan and Caravelle International 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 Caravelle International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Caravelle International Group, you can compare the effects of market volatilities on Stepan and Caravelle International 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 Caravelle International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Caravelle International.
Diversification Opportunities for Stepan and Caravelle International
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Stepan and Caravelle is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Caravelle International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravelle International 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 Caravelle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravelle International has no effect on the direction of Stepan i.e., Stepan and Caravelle International go up and down completely randomly.
Pair Corralation between Stepan and Caravelle International
Considering the 90-day investment horizon Stepan Company is expected to generate 0.22 times more return on investment than Caravelle International. However, Stepan Company is 4.5 times less risky than Caravelle International. It trades about 0.02 of its potential returns per unit of risk. Caravelle International Group is currently generating about -0.15 per unit of risk. If you would invest 6,318 in Stepan Company on November 3, 2024 and sell it today you would earn a total of 21.00 from holding Stepan Company or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Caravelle International Group
Performance |
| Timeline |
| Stepan Company |
| Caravelle International |
Stepan and Caravelle International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Caravelle International
The main advantage of trading using opposite Stepan and Caravelle International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Caravelle International 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 Caravelle International will offset losses from the drop in Caravelle International's long position.The idea behind Stepan Company and Caravelle International Group 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.| Caravelle International vs. RBC Bearings Incorporated | Caravelle International vs. Beauty Health Co | Caravelle International vs. Timken Company | Caravelle International vs. flyExclusive, |
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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