Correlation Between Stepan and Western Sierra
Can any of the company-specific risk be diversified away by investing in both Stepan and Western Sierra 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 Western Sierra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Western Sierra Mining, you can compare the effects of market volatilities on Stepan and Western Sierra 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 Western Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Western Sierra.
Diversification Opportunities for Stepan and Western Sierra
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Stepan and Western is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining 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 Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Stepan i.e., Stepan and Western Sierra go up and down completely randomly.
Pair Corralation between Stepan and Western Sierra
Considering the 90-day investment horizon Stepan Company is expected to generate 5.33 times more return on investment than Western Sierra. However, Stepan is 5.33 times more volatile than Western Sierra Mining. It trades about 0.14 of its potential returns per unit of risk. Western Sierra Mining is currently generating about 0.0 per unit of risk. If you would invest 7,197 in Stepan Company on September 1, 2024 and sell it today you would earn a total of 493.00 from holding Stepan Company or generate 6.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Stepan Company vs. Western Sierra Mining
Performance |
| Timeline |
| Stepan Company |
| Western Sierra Mining |
Stepan and Western Sierra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Western Sierra
The main advantage of trading using opposite Stepan and Western Sierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Western Sierra 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 Western Sierra will offset losses from the drop in Western Sierra's long position.The idea behind Stepan Company and Western Sierra Mining 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.| Western Sierra vs. Green Cures Botanical | Western Sierra vs. Cann American Corp | Western Sierra vs. Rimrock Gold Corp | Western Sierra vs. Galexxy Holdings |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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