Correlation Between Stepan and Pure Cycle
Can any of the company-specific risk be diversified away by investing in both Stepan and Pure Cycle 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 Pure Cycle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Pure Cycle, you can compare the effects of market volatilities on Stepan and Pure Cycle 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 Pure Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Pure Cycle.
Diversification Opportunities for Stepan and Pure Cycle
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stepan and Pure is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle 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 Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of Stepan i.e., Stepan and Pure Cycle go up and down completely randomly.
Pair Corralation between Stepan and Pure Cycle
Considering the 90-day investment horizon Stepan is expected to generate 4.98 times less return on investment than Pure Cycle. But when comparing it to its historical volatility, Stepan Company is 1.35 times less risky than Pure Cycle. It trades about 0.13 of its potential returns per unit of risk. Pure Cycle is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest 1,069 in Pure Cycle on September 2, 2024 and sell it today you would earn a total of 385.00 from holding Pure Cycle or generate 36.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Pure Cycle
Performance |
| Timeline |
| Stepan Company |
| Pure Cycle |
Stepan and Pure Cycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Pure Cycle
The main advantage of trading using opposite Stepan and Pure Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Pure Cycle 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 Pure Cycle will offset losses from the drop in Pure Cycle's long position.| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
| Pure Cycle vs. Cadiz Inc | Pure Cycle vs. Artesian Resources | Pure Cycle vs. Global Water Resources | Pure Cycle vs. Parke Bancorp |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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