Correlation Between Stepan and Visteon Corp
Can any of the company-specific risk be diversified away by investing in both Stepan and Visteon Corp 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 Visteon Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Visteon Corp, you can compare the effects of market volatilities on Stepan and Visteon Corp 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 Visteon Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Visteon Corp.
Diversification Opportunities for Stepan and Visteon Corp
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stepan and Visteon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp 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 Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of Stepan i.e., Stepan and Visteon Corp go up and down completely randomly.
Pair Corralation between Stepan and Visteon Corp
Considering the 90-day investment horizon Stepan Company is expected to generate 0.94 times more return on investment than Visteon Corp. However, Stepan Company is 1.06 times less risky than Visteon Corp. It trades about -0.06 of its potential returns per unit of risk. Visteon Corp is currently generating about -0.06 per unit of risk. If you would invest 8,767 in Stepan Company on November 3, 2024 and sell it today you would lose (2,428) from holding Stepan Company or give up 27.69% 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. Visteon Corp
Performance |
| Timeline |
| Stepan Company |
| Visteon Corp |
Stepan and Visteon Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Visteon Corp
The main advantage of trading using opposite Stepan and Visteon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Visteon Corp 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 Visteon Corp will offset losses from the drop in Visteon Corp's long position.The idea behind Stepan Company and Visteon Corp 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.| Visteon Corp vs. Gentex | Visteon Corp vs. Adient PLC | Visteon Corp vs. Autoliv | Visteon Corp vs. Fox Factory Holding |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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