Correlation Between Stepan and Vestis
Can any of the company-specific risk be diversified away by investing in both Stepan and Vestis 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 Vestis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Vestis, you can compare the effects of market volatilities on Stepan and Vestis 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 Vestis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Vestis.
Diversification Opportunities for Stepan and Vestis
Modest diversification
The 3 months correlation between Stepan and Vestis is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Vestis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestis 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 Vestis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestis has no effect on the direction of Stepan i.e., Stepan and Vestis go up and down completely randomly.
Pair Corralation between Stepan and Vestis
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Vestis. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 2.0 times less risky than Vestis. The stock trades about -0.04 of its potential returns per unit of risk. The Vestis is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,899 in Vestis on November 27, 2024 and sell it today you would lose (595.00) from holding Vestis or give up 31.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.6% |
| Values | Daily Returns |
Stepan Company vs. Vestis
Performance |
| Timeline |
| Stepan Company |
| Vestis |
Stepan and Vestis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Vestis
The main advantage of trading using opposite Stepan and Vestis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Vestis 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 Vestis will offset losses from the drop in Vestis' long position.The idea behind Stepan Company and Vestis 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.| Vestis vs. Alto Ingredients | Vestis vs. Stepan Company | Vestis vs. Take Two Interactive Software | Vestis vs. PPG Industries |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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