Correlation Between Stepan and Proficient Auto
Can any of the company-specific risk be diversified away by investing in both Stepan and Proficient Auto 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 Proficient Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Proficient Auto Logistics,, you can compare the effects of market volatilities on Stepan and Proficient Auto 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 Proficient Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Proficient Auto.
Diversification Opportunities for Stepan and Proficient Auto
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Stepan and Proficient is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Proficient Auto Logistics, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proficient Auto Logi 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 Proficient Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proficient Auto Logi has no effect on the direction of Stepan i.e., Stepan and Proficient Auto go up and down completely randomly.
Pair Corralation between Stepan and Proficient Auto
Considering the 90-day investment horizon Stepan Company is expected to generate 0.51 times more return on investment than Proficient Auto. However, Stepan Company is 1.95 times less risky than Proficient Auto. It trades about -0.06 of its potential returns per unit of risk. Proficient Auto Logistics, is currently generating about -0.05 per unit of risk. If you would invest 8,767 in Stepan Company on November 3, 2024 and sell it today you would lose (2,428) from holding Stepan Company or give up 27.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 74.6% |
| Values | Daily Returns |
Stepan Company vs. Proficient Auto Logistics,
Performance |
| Timeline |
| Stepan Company |
| Proficient Auto Logi |
Stepan and Proficient Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Proficient Auto
The main advantage of trading using opposite Stepan and Proficient Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Proficient Auto 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 Proficient Auto will offset losses from the drop in Proficient Auto's long position.The idea behind Stepan Company and Proficient Auto Logistics, 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.| Proficient Auto vs. Amkor Technology | Proficient Auto vs. Kaiser Aluminum | Proficient Auto vs. Chemours Co | Proficient Auto vs. Jabil Circuit |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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