Correlation Between CVW CleanTech and Stepan

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Can any of the company-specific risk be diversified away by investing in both CVW CleanTech 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 CVW CleanTech and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVW CleanTech and Stepan Company, you can compare the effects of market volatilities on CVW CleanTech 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 CVW CleanTech with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CleanTech and Stepan.

Diversification Opportunities for CVW CleanTech and Stepan

0.19
  Correlation Coefficient

Average diversification

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

Pair Corralation between CVW CleanTech and Stepan

Assuming the 90 days horizon CVW CleanTech is expected to generate 1.21 times more return on investment than Stepan. However, CVW CleanTech is 1.21 times more volatile than Stepan Company. It trades about 0.01 of its potential returns per unit of risk. Stepan Company is currently generating about -0.28 per unit of risk. If you would invest  62.00  in CVW CleanTech on September 20, 2024 and sell it today you would earn a total of  0.00  from holding CVW CleanTech or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CVW CleanTech  vs.  Stepan Company

 Performance 
       Timeline  
CVW CleanTech 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Stepan Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

CVW CleanTech and Stepan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CVW CleanTech and Stepan

The main advantage of trading using opposite CVW CleanTech and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CleanTech 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 CVW CleanTech 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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