Correlation Between Stepan and INVESCO
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By analyzing existing cross correlation between Stepan Company and INVESCO FIN PLC, you can compare the effects of market volatilities on Stepan and INVESCO 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 INVESCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and INVESCO.
Diversification Opportunities for Stepan and INVESCO
Very good diversification
The 3 months correlation between Stepan and INVESCO is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and INVESCO FIN PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVESCO FIN PLC 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 INVESCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVESCO FIN PLC has no effect on the direction of Stepan i.e., Stepan and INVESCO go up and down completely randomly.
Pair Corralation between Stepan and INVESCO
Considering the 90-day investment horizon Stepan Company is expected to generate 2.39 times more return on investment than INVESCO. However, Stepan is 2.39 times more volatile than INVESCO FIN PLC. It trades about 0.13 of its potential returns per unit of risk. INVESCO FIN PLC is currently generating about 0.09 per unit of risk. If you would invest 7,246 in Stepan Company on September 3, 2024 and sell it today you would earn a total of 444.00 from holding Stepan Company or generate 6.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 45.0% |
| Values | Daily Returns |
Stepan Company vs. INVESCO FIN PLC
Performance |
| Timeline |
| Stepan Company |
| INVESCO FIN PLC |
Stepan and INVESCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and INVESCO
The main advantage of trading using opposite Stepan and INVESCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, INVESCO 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 INVESCO will offset losses from the drop in INVESCO's long position.The idea behind Stepan Company and INVESCO FIN PLC 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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