Correlation Between Stepan and Purecycle Technologies
Can any of the company-specific risk be diversified away by investing in both Stepan and Purecycle Technologies 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 Purecycle Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Purecycle Technologies Holdings, you can compare the effects of market volatilities on Stepan and Purecycle Technologies 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 Purecycle Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Purecycle Technologies.
Diversification Opportunities for Stepan and Purecycle Technologies
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Stepan and Purecycle is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Purecycle Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purecycle Technologies 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 Purecycle Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purecycle Technologies has no effect on the direction of Stepan i.e., Stepan and Purecycle Technologies go up and down completely randomly.
Pair Corralation between Stepan and Purecycle Technologies
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Purecycle Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 3.23 times less risky than Purecycle Technologies. The stock trades about -0.04 of its potential returns per unit of risk. The Purecycle Technologies Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 948.00 in Purecycle Technologies Holdings on November 9, 2024 and sell it today you would earn a total of 202.00 from holding Purecycle Technologies Holdings or generate 21.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Purecycle Technologies Holding
Performance |
| Timeline |
| Stepan Company |
| Purecycle Technologies |
Stepan and Purecycle Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Purecycle Technologies
The main advantage of trading using opposite Stepan and Purecycle Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Purecycle Technologies 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 Purecycle Technologies will offset losses from the drop in Purecycle Technologies' long position.The idea behind Stepan Company and Purecycle Technologies Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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