Correlation Between Stepan and Stagwell
Can any of the company-specific risk be diversified away by investing in both Stepan and Stagwell 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 Stagwell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Stagwell, you can compare the effects of market volatilities on Stepan and Stagwell 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 Stagwell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Stagwell.
Diversification Opportunities for Stepan and Stagwell
Poor diversification
The 3 months correlation between Stepan and Stagwell is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of Stepan i.e., Stepan and Stagwell go up and down completely randomly.
Pair Corralation between Stepan and Stagwell
Considering the 90-day investment horizon Stepan Company is expected to generate 0.6 times more return on investment than Stagwell. However, Stepan Company is 1.67 times less risky than Stagwell. It trades about -0.07 of its potential returns per unit of risk. Stagwell is currently generating about -0.08 per unit of risk. If you would invest 7,668 in Stepan Company on September 13, 2024 and sell it today you would lose (141.50) from holding Stepan Company or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Stagwell
Performance |
| Timeline |
| Stepan Company |
| Stagwell |
Stepan and Stagwell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Stagwell
The main advantage of trading using opposite Stepan and Stagwell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Stagwell 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 Stagwell will offset losses from the drop in Stagwell's long position.| Stepan vs. LyondellBasell Industries NV | Stepan vs. International Flavors Fragrances | Stepan vs. Cabot | Stepan vs. Westlake Chemical |
| Stagwell vs. Liberty Media | Stagwell vs. Atlanta Braves Holdings, | Stagwell vs. News Corp B | Stagwell vs. News Corp A |
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 CEOs Directory module to screen CEOs from public companies around the world.
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