Correlation Between Aterian and Stepan

Can any of the company-specific risk be diversified away by investing in both Aterian 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 Aterian and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aterian and Stepan Company, you can compare the effects of market volatilities on Aterian 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 Aterian with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aterian and Stepan.

Diversification Opportunities for Aterian and Stepan

0.07

Correlation Coefficient

Aterian  Stepan

Significant diversification

The 3 months correlation between Aterian and Stepan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Aterian and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Aterian 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 Aterian 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 Aterian i.e., Aterian and Stepan go up and down completely randomly.

Pair Corralation between Aterian and Stepan

Given the investment horizon of 90 days Aterian is expected to under-perform the Stepan. In addition to that, Aterian is 1.62 times more volatile than Stepan Company. It trades about -0.14 of its total potential returns per unit of risk. Stepan Company is currently generating about 0.0 per unit of volatility. If you would invest  7,419  in Stepan Company on September 15, 2024 and sell it today you would lose (63.00) from holding Stepan Company or give up 0.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aterian  vs.  Stepan Company

Aterian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aterian and Stepan

The main advantage of trading using opposite Aterian and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aterian 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.

The idea behind Aterian and Stepan Company 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.