Correlation Between Stepan and Vodka Brands
Can any of the company-specific risk be diversified away by investing in both Stepan and Vodka Brands 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 Vodka Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Vodka Brands Corp, you can compare the effects of market volatilities on Stepan and Vodka Brands 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 Vodka Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Vodka Brands.
Diversification Opportunities for Stepan and Vodka Brands
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Stepan and Vodka is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Vodka Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodka Brands 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 Vodka Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodka Brands Corp has no effect on the direction of Stepan i.e., Stepan and Vodka Brands go up and down completely randomly.
Pair Corralation between Stepan and Vodka Brands
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Vodka Brands. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 2.15 times less risky than Vodka Brands. The stock trades about -0.13 of its potential returns per unit of risk. The Vodka Brands Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 99.00 in Vodka Brands Corp on September 12, 2024 and sell it today you would earn a total of 13.00 from holding Vodka Brands Corp or generate 13.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Vodka Brands Corp
Performance |
| Timeline |
| Stepan Company |
| Vodka Brands Corp |
Stepan and Vodka Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Vodka Brands
The main advantage of trading using opposite Stepan and Vodka Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Vodka Brands 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 Vodka Brands will offset losses from the drop in Vodka Brands' long position.The idea behind Stepan Company and Vodka Brands 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.| Vodka Brands vs. Andrew Peller Limited | Vodka Brands vs. Aristocrat Group Corp | Vodka Brands vs. Iconic Brands | Vodka Brands vs. Naked Wines plc |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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