Correlation Between United States and Stepan
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Stepan Company, you can compare the effects of market volatilities on United States 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 United States with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Stepan.
Diversification Opportunities for United States and Stepan
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Stepan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and United States 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 United States Steel 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 United States i.e., United States and Stepan go up and down completely randomly.
Pair Corralation between United States and Stepan
Taking into account the 90-day investment horizon United States Steel is expected to generate 1.5 times more return on investment than Stepan. However, United States is 1.5 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 0.04 per unit of risk. If you would invest 3,287 in United States Steel on September 4, 2024 and sell it today you would earn a total of 808.00 from holding United States Steel or generate 24.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Stepan Company
Performance |
| Timeline |
| United States Steel |
| Stepan Company |
United States and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Stepan
The main advantage of trading using opposite United States and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Constellium Nv | United States vs. Century Aluminum | United States vs. China Hongqiao Group | United States vs. Kaiser Aluminum |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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