Correlation Between Iris Acquisition and Stepan

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

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

Diversification Opportunities for Iris Acquisition and Stepan

-0.06

Correlation Coefficient

Iris Acquisition  Stepan

Good diversification

The 3 months correlation between Iris and Stepan is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Iris Acquisition Corp and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Iris Acquisition 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 Iris Acquisition Corp 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 Iris Acquisition i.e., Iris Acquisition and Stepan go up and down completely randomly.

Pair Corralation between Iris Acquisition and Stepan

Given the investment horizon of 90 days Iris Acquisition Corp is expected to generate 0.84 times more return on investment than Stepan. However, Iris Acquisition Corp is 1.19 times less risky than Stepan. It trades about 0.01 of its potential returns per unit of risk. Stepan Company is currently generating about -0.01 per unit of risk. If you would invest  1,033  in Iris Acquisition Corp on September 14, 2024 and sell it today you would earn a total of  18.00  from holding Iris Acquisition Corp or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.09%
Values	Daily Returns

Iris Acquisition Corp  vs.  Stepan Company

Iris Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Iris Acquisition and Stepan

The main advantage of trading using opposite Iris Acquisition and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iris Acquisition 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 Iris Acquisition Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.