Correlation Between Stepan and Lifevantage
Can any of the company-specific risk be diversified away by investing in both Stepan and Lifevantage 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 Lifevantage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Lifevantage, you can compare the effects of market volatilities on Stepan and Lifevantage 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 Lifevantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Lifevantage.
Diversification Opportunities for Stepan and Lifevantage
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Stepan and Lifevantage is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage 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 Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of Stepan i.e., Stepan and Lifevantage go up and down completely randomly.
Pair Corralation between Stepan and Lifevantage
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Lifevantage. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 2.39 times less risky than Lifevantage. The stock trades about -0.03 of its potential returns per unit of risk. The Lifevantage is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 346.00 in Lifevantage on August 30, 2024 and sell it today you would earn a total of 1,094 from holding Lifevantage or generate 316.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Lifevantage
Performance |
| Timeline |
| Stepan Company |
| Lifevantage |
Stepan and Lifevantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Lifevantage
The main advantage of trading using opposite Stepan and Lifevantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Lifevantage 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 Lifevantage will offset losses from the drop in Lifevantage's long position.The idea behind Stepan Company and Lifevantage 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.| Lifevantage vs. Seneca Foods Corp | Lifevantage vs. Central Garden Pet | Lifevantage vs. Central Garden Pet | Lifevantage vs. Lifeway Foods |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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