Correlation Between China Clean and Stepan

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

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

Diversification Opportunities for China Clean and Stepan

0.0

Correlation Coefficient

China Clean  Stepan

Pay attention - limited upside

The 3 months correlation between China and Stepan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Clean Energy and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and China Clean 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 China Clean Energy 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 China Clean i.e., China Clean and Stepan go up and down completely randomly.

Pair Corralation between China Clean and Stepan

If you would invest  0.01  in China Clean Energy on September 19, 2024 and sell it today you would earn a total of  0.00  from holding China Clean Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

China Clean Energy  vs.  Stepan Company

China Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, China Clean is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with China Clean and Stepan

The main advantage of trading using opposite China Clean and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Clean 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 China Clean Energy 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.