Correlation Between Stepan and RadNet
Can any of the company-specific risk be diversified away by investing in both Stepan and RadNet 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 RadNet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and RadNet Inc, you can compare the effects of market volatilities on Stepan and RadNet 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 RadNet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and RadNet.
Diversification Opportunities for Stepan and RadNet
Very weak diversification
The 3 months correlation between Stepan and RadNet is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and RadNet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RadNet 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 RadNet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RadNet Inc has no effect on the direction of Stepan i.e., Stepan and RadNet go up and down completely randomly.
Pair Corralation between Stepan and RadNet
Considering the 90-day investment horizon Stepan is expected to generate 8.33 times less return on investment than RadNet. But when comparing it to its historical volatility, Stepan Company is 1.81 times less risky than RadNet. It trades about 0.05 of its potential returns per unit of risk. RadNet Inc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 6,676 in RadNet Inc on August 31, 2024 and sell it today you would earn a total of 1,573 from holding RadNet Inc or generate 23.56% 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. RadNet Inc
Performance |
| Timeline |
| Stepan Company |
| RadNet Inc |
Stepan and RadNet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and RadNet
The main advantage of trading using opposite Stepan and RadNet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, RadNet 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 RadNet will offset losses from the drop in RadNet's long position.The idea behind Stepan Company and RadNet 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.| RadNet vs. Sotera Health Co | RadNet vs. Neogen | RadNet vs. Myriad Genetics | RadNet vs. bioAffinity Technologies Warrant |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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