Correlation Between BBB Foods and Stepan
Can any of the company-specific risk be diversified away by investing in both BBB Foods 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 BBB Foods and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and Stepan Company, you can compare the effects of market volatilities on BBB Foods 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 BBB Foods with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and Stepan.
Diversification Opportunities for BBB Foods and Stepan
Very weak diversification
The 3 months correlation between BBB and Stepan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and BBB Foods 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 BBB Foods 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 BBB Foods i.e., BBB Foods and Stepan go up and down completely randomly.
Pair Corralation between BBB Foods and Stepan
Given the investment horizon of 90 days BBB Foods is expected to generate 1.35 times more return on investment than Stepan. However, BBB Foods is 1.35 times more volatile than Stepan Company. It trades about 0.04 of its potential returns per unit of risk. Stepan Company is currently generating about -0.2 per unit of risk. If you would invest 2,920 in BBB Foods on October 20, 2024 and sell it today you would earn a total of 31.00 from holding BBB Foods or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BBB Foods vs. Stepan Company
Performance |
| Timeline |
| BBB Foods |
| Stepan Company |
BBB Foods and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and Stepan
The main advantage of trading using opposite BBB Foods and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods 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.| BBB Foods vs. InfuSystems Holdings | BBB Foods vs. HNI Corp | BBB Foods vs. Rocky Brands | BBB Foods vs. Vera Bradley |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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