Correlation Between Stepan and TFI International
Can any of the company-specific risk be diversified away by investing in both Stepan and TFI International 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 TFI International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and TFI International, you can compare the effects of market volatilities on Stepan and TFI International 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 TFI International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and TFI International.
Diversification Opportunities for Stepan and TFI International
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stepan and TFI is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Stepan i.e., Stepan and TFI International go up and down completely randomly.
Pair Corralation between Stepan and TFI International
Considering the 90-day investment horizon Stepan is expected to generate 1.77 times less return on investment than TFI International. But when comparing it to its historical volatility, Stepan Company is 1.02 times less risky than TFI International. It trades about 0.11 of its potential returns per unit of risk. TFI International is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 13,615 in TFI International on August 28, 2024 and sell it today you would earn a total of 1,368 from holding TFI International or generate 10.05% 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. TFI International
Performance |
| Timeline |
| Stepan Company |
| TFI International |
Stepan and TFI International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and TFI International
The main advantage of trading using opposite Stepan and TFI International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, TFI International 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 TFI International will offset losses from the drop in TFI International's long position.The idea behind Stepan Company and TFI International 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.| TFI International vs. Old Dominion Freight | TFI International vs. ArcBest Corp | TFI International vs. Marten Transport | TFI International vs. Werner Enterprises |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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