Correlation Between Software Acquisition and Stepan
Can any of the company-specific risk be diversified away by investing in both Software Acquisition 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 Software Acquisition and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Software Acquisition Group and Stepan Company, you can compare the effects of market volatilities on Software Acquisition 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 Software Acquisition with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Acquisition and Stepan.
Diversification Opportunities for Software Acquisition and Stepan
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Software and Stepan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Software Acquisition Group and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Software Acquisition 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 Software Acquisition Group 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 Software Acquisition i.e., Software Acquisition and Stepan go up and down completely randomly.
Pair Corralation between Software Acquisition and Stepan
Given the investment horizon of 90 days Software Acquisition is expected to generate 3.61 times less return on investment than Stepan. But when comparing it to its historical volatility, Software Acquisition Group is 1.18 times less risky than Stepan. It trades about 0.03 of its potential returns per unit of risk. Stepan Company is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,273 in Stepan Company on August 24, 2024 and sell it today you would earn a total of 327.00 from holding Stepan Company or generate 4.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Software Acquisition Group vs. Stepan Company
Performance |
| Timeline |
| Software Acquisition |
| Stepan Company |
Software Acquisition and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Software Acquisition and Stepan
The main advantage of trading using opposite Software Acquisition and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Acquisition 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.| Software Acquisition vs. Getty Images Holdings | Software Acquisition vs. Zhihu Inc ADR | Software Acquisition vs. Catalyst Pharmaceuticals | Software Acquisition vs. Inhibrx |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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