Correlation Between Stepan and Jeld Wen
Can any of the company-specific risk be diversified away by investing in both Stepan and Jeld Wen 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 Jeld Wen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Jeld Wen Holding, you can compare the effects of market volatilities on Stepan and Jeld Wen 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 Jeld Wen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Jeld Wen.
Diversification Opportunities for Stepan and Jeld Wen
Good diversification
The 3 months correlation between Stepan and Jeld is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Jeld Wen Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeld Wen 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 Jeld Wen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeld Wen Holding has no effect on the direction of Stepan i.e., Stepan and Jeld Wen go up and down completely randomly.
Pair Corralation between Stepan and Jeld Wen
Considering the 90-day investment horizon Stepan Company is expected to generate 0.33 times more return on investment than Jeld Wen. However, Stepan Company is 3.02 times less risky than Jeld Wen. It trades about 0.06 of its potential returns per unit of risk. Jeld Wen Holding is currently generating about -0.15 per unit of risk. If you would invest 7,387 in Stepan Company on August 28, 2024 and sell it today you would earn a total of 215.00 from holding Stepan Company or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Jeld Wen Holding
Performance |
| Timeline |
| Stepan Company |
| Jeld Wen Holding |
Stepan and Jeld Wen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Jeld Wen
The main advantage of trading using opposite Stepan and Jeld Wen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Jeld Wen 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 Jeld Wen will offset losses from the drop in Jeld Wen's long position.The idea behind Stepan Company and Jeld Wen Holding 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.| Jeld Wen vs. Trex Company | Jeld Wen vs. Travis Perkins PLC | Jeld Wen vs. Janus International Group | Jeld Wen vs. Interface |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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