Correlation Between Stepan and Ziff Davis
Can any of the company-specific risk be diversified away by investing in both Stepan and Ziff Davis 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 Ziff Davis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Ziff Davis, you can compare the effects of market volatilities on Stepan and Ziff Davis 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 Ziff Davis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Ziff Davis.
Diversification Opportunities for Stepan and Ziff Davis
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stepan and Ziff is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Ziff Davis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ziff Davis 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 Ziff Davis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ziff Davis has no effect on the direction of Stepan i.e., Stepan and Ziff Davis go up and down completely randomly.
Pair Corralation between Stepan and Ziff Davis
Considering the 90-day investment horizon Stepan is expected to generate 3.56 times less return on investment than Ziff Davis. But when comparing it to its historical volatility, Stepan Company is 1.62 times less risky than Ziff Davis. It trades about 0.14 of its potential returns per unit of risk. Ziff Davis is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 4,627 in Ziff Davis on September 1, 2024 and sell it today you would earn a total of 1,258 from holding Ziff Davis or generate 27.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Ziff Davis
Performance |
| Timeline |
| Stepan Company |
| Ziff Davis |
Stepan and Ziff Davis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Ziff Davis
The main advantage of trading using opposite Stepan and Ziff Davis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Ziff Davis 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 Ziff Davis will offset losses from the drop in Ziff Davis' long position.The idea behind Stepan Company and Ziff Davis 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.| Ziff Davis vs. Interpublic Group of | Ziff Davis vs. Criteo Sa | Ziff Davis vs. WPP PLC ADR | Ziff Davis vs. Integral Ad Science |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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