Correlation Between Stagwell and Stepan
Can any of the company-specific risk be diversified away by investing in both Stagwell and Stepan 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 Stagwell and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stagwell and Stepan Company, you can compare the effects of market volatilities on Stagwell and Stepan 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 Stagwell with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stagwell and Stepan.
Diversification Opportunities for Stagwell and Stepan
Poor diversification
The 3 months correlation between Stagwell and Stepan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Stagwell 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 Stagwell are associated (or correlated) with Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Stagwell i.e., Stagwell and Stepan go up and down completely randomly.
Pair Corralation between Stagwell and Stepan
Given the investment horizon of 90 days Stagwell is expected to generate 1.46 times more return on investment than Stepan. However, Stagwell is 1.46 times more volatile than Stepan Company. It trades about -0.09 of its potential returns per unit of risk. Stepan Company is currently generating about -0.17 per unit of risk. If you would invest 782.00 in Stagwell on September 12, 2024 and sell it today you would lose (32.00) from holding Stagwell or give up 4.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stagwell vs. Stepan Company
Performance |
| Timeline |
| Stagwell |
| Stepan Company |
Stagwell and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stagwell and Stepan
The main advantage of trading using opposite Stagwell and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stagwell position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Stagwell vs. Innovid Corp | Stagwell vs. Interpublic Group of | Stagwell vs. Cimpress NV | Stagwell vs. Criteo Sa |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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