Correlation Between Stepan and NetMed
Can any of the company-specific risk be diversified away by investing in both Stepan and NetMed 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 NetMed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and NetMed Inc, you can compare the effects of market volatilities on Stepan and NetMed 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 NetMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and NetMed.
Diversification Opportunities for Stepan and NetMed
Good diversification
The 3 months correlation between Stepan and NetMed is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and NetMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetMed Inc 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 NetMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetMed Inc has no effect on the direction of Stepan i.e., Stepan and NetMed go up and down completely randomly.
Pair Corralation between Stepan and NetMed
If you would invest (100.00) in NetMed Inc on August 29, 2024 and sell it today you would earn a total of 100.00 from holding NetMed Inc or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Stepan Company vs. NetMed Inc
Performance |
| Timeline |
| Stepan Company |
| NetMed Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Stepan and NetMed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and NetMed
The main advantage of trading using opposite Stepan and NetMed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, NetMed 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 NetMed will offset losses from the drop in NetMed's long position.The idea behind Stepan Company and NetMed Inc 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.| NetMed vs. Peoples Educational Holdings | NetMed vs. IPG Photonics | NetMed vs. Avient Corp | NetMed vs. Stepan Company |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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