Correlation Between Stepan and BLACK
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By analyzing existing cross correlation between Stepan Company and BLACK HILLS P, you can compare the effects of market volatilities on Stepan and BLACK 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 BLACK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and BLACK.
Diversification Opportunities for Stepan and BLACK
Significant diversification
The 3 months correlation between Stepan and BLACK is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and BLACK HILLS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLACK HILLS P 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 BLACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLACK HILLS P has no effect on the direction of Stepan i.e., Stepan and BLACK go up and down completely randomly.
Pair Corralation between Stepan and BLACK
Considering the 90-day investment horizon Stepan Company is expected to under-perform the BLACK. In addition to that, Stepan is 2.75 times more volatile than BLACK HILLS P. It trades about -0.03 of its total potential returns per unit of risk. BLACK HILLS P is currently generating about 0.0 per unit of volatility. If you would invest 9,448 in BLACK HILLS P on September 3, 2024 and sell it today you would lose (66.00) from holding BLACK HILLS P or give up 0.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 61.21% |
| Values | Daily Returns |
Stepan Company vs. BLACK HILLS P
Performance |
| Timeline |
| Stepan Company |
| BLACK HILLS P |
Stepan and BLACK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and BLACK
The main advantage of trading using opposite Stepan and BLACK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, BLACK 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 BLACK will offset losses from the drop in BLACK's long position.The idea behind Stepan Company and BLACK HILLS P 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.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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