Correlation Between Stepan and Integral
Can any of the company-specific risk be diversified away by investing in both Stepan and Integral 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 Integral into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Integral Ad Science, you can compare the effects of market volatilities on Stepan and Integral 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 Integral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Integral.
Diversification Opportunities for Stepan and Integral
Modest diversification
The 3 months correlation between Stepan and Integral is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Integral Ad Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integral Ad Science 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 Integral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integral Ad Science has no effect on the direction of Stepan i.e., Stepan and Integral go up and down completely randomly.
Pair Corralation between Stepan and Integral
Considering the 90-day investment horizon Stepan Company is expected to generate 0.5 times more return on investment than Integral. However, Stepan Company is 2.02 times less risky than Integral. It trades about -0.02 of its potential returns per unit of risk. Integral Ad Science is currently generating about -0.02 per unit of risk. If you would invest 9,555 in Stepan Company on September 1, 2024 and sell it today you would lose (1,865) from holding Stepan Company or give up 19.52% 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. Integral Ad Science
Performance |
| Timeline |
| Stepan Company |
| Integral Ad Science |
Stepan and Integral Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Integral
The main advantage of trading using opposite Stepan and Integral positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Integral 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 Integral will offset losses from the drop in Integral's long position.The idea behind Stepan Company and Integral Ad Science 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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