Correlation Between Papaya Growth and Stepan

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

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

Diversification Opportunities for Papaya Growth and Stepan

0.07

Correlation Coefficient

Papaya Growth  Stepan

Significant diversification

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

Pair Corralation between Papaya Growth and Stepan

Assuming the 90 days horizon Papaya Growth Opportunity is expected to generate 0.21 times more return on investment than Stepan. However, Papaya Growth Opportunity is 4.87 times less risky than Stepan. It trades about -0.04 of its potential returns per unit of risk. Stepan Company is currently generating about -0.13 per unit of risk. If you would invest  1,129  in Papaya Growth Opportunity on September 29, 2024 and sell it today you would lose (10.00) from holding Papaya Growth Opportunity or give up 0.89% of portfolio value over 90 days.

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

Papaya Growth Opportunity  vs.  Stepan Company

Papaya Growth Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papaya Growth Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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 unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Papaya Growth and Stepan

The main advantage of trading using opposite Papaya Growth and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papaya Growth 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 Papaya Growth Opportunity 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.