Correlation Between Stepan and Brenmiller Energy

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

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

Diversification Opportunities for Stepan and Brenmiller Energy

0.15

Correlation Coefficient

Stepan  Brenmiller Energy

Average diversification

The 3 months correlation between Stepan and Brenmiller is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Brenmiller Energy Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brenmiller Energy and Stepan 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 Stepan Company are associated (or correlated) with Brenmiller Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brenmiller Energy has no effect on the direction of Stepan i.e., Stepan and Brenmiller Energy go up and down completely randomly.

Pair Corralation between Stepan and Brenmiller Energy

Considering the 90-day investment horizon Stepan Company is expected to generate 0.19 times more return on investment than Brenmiller Energy. However, Stepan Company is 5.3 times less risky than Brenmiller Energy. It trades about -0.04 of its potential returns per unit of risk. Brenmiller Energy Ltd is currently generating about -0.03 per unit of risk. If you would invest  10,060  in Stepan Company on September 23, 2024 and sell it today you would lose (3,348) from holding Stepan Company or give up 33.28% of portfolio value over 90 days.

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

Stepan Company  vs.  Brenmiller Energy Ltd

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.

Brenmiller Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brenmiller Energy Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Stepan and Brenmiller Energy

The main advantage of trading using opposite Stepan and Brenmiller Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Brenmiller Energy 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 Brenmiller Energy will offset losses from the drop in Brenmiller Energy's long position.

The idea behind Stepan Company and Brenmiller Energy Ltd 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.