Correlation Between Canlan Ice and Stepan

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

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

Diversification Opportunities for Canlan Ice and Stepan

-0.19

Correlation Coefficient

Canlan Ice  Stepan

Good diversification

The 3 months correlation between Canlan and Stepan is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Canlan Ice 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 Canlan Ice Sports 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 Canlan Ice i.e., Canlan Ice and Stepan go up and down completely randomly.

Pair Corralation between Canlan Ice and Stepan

Assuming the 90 days horizon Canlan Ice Sports is expected to generate 0.08 times more return on investment than Stepan. However, Canlan Ice Sports is 11.97 times less risky than Stepan. It trades about 0.17 of its potential returns per unit of risk. Stepan Company is currently generating about -0.1 per unit of risk. If you would invest  292.00  in Canlan Ice Sports on September 24, 2024 and sell it today you would earn a total of  5.00  from holding Canlan Ice Sports or generate 1.71% return on investment over 90 days.

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

Canlan Ice Sports  vs.  Stepan Company

Canlan Ice Sports

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Canlan Ice and Stepan

The main advantage of trading using opposite Canlan Ice and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canlan Ice 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 Canlan Ice Sports 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.