Correlation Between Stepan and Qualys
Can any of the company-specific risk be diversified away by investing in both Stepan and Qualys 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 Qualys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Qualys Inc, you can compare the effects of market volatilities on Stepan and Qualys 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 Qualys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Qualys.
Diversification Opportunities for Stepan and Qualys
Very weak diversification
The 3 months correlation between Stepan and Qualys is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Qualys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualys 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 Qualys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualys Inc has no effect on the direction of Stepan i.e., Stepan and Qualys go up and down completely randomly.
Pair Corralation between Stepan and Qualys
Considering the 90-day investment horizon Stepan is expected to generate 4.83 times less return on investment than Qualys. But when comparing it to its historical volatility, Stepan Company is 2.29 times less risky than Qualys. It trades about 0.09 of its potential returns per unit of risk. Qualys Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 12,150 in Qualys Inc on August 24, 2024 and sell it today you would earn a total of 2,868 from holding Qualys Inc or generate 23.6% 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. Qualys Inc
Performance |
| Timeline |
| Stepan Company |
| Qualys Inc |
Stepan and Qualys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Qualys
The main advantage of trading using opposite Stepan and Qualys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Qualys 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 Qualys will offset losses from the drop in Qualys' long position.The idea behind Stepan Company and Qualys 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.| Qualys vs. Rapid7 Inc | Qualys vs. CyberArk Software | Qualys vs. Varonis Systems | Qualys vs. Check Point Software |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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