Correlation Between Stepan and Cannae Holdings

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

By analyzing existing cross correlation between Stepan Company and Cannae Holdings, you can compare the effects of market volatilities on Stepan and Cannae Holdings 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 Cannae Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Cannae Holdings.

Diversification Opportunities for Stepan and Cannae Holdings

0.33

Correlation Coefficient

Stepan  Cannae Holdings

Weak diversification

The 3 months correlation between Stepan and Cannae is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Cannae Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannae Holdings 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 Cannae Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannae Holdings has no effect on the direction of Stepan i.e., Stepan and Cannae Holdings go up and down completely randomly.

Pair Corralation between Stepan and Cannae Holdings

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Cannae Holdings. In addition to that, Stepan is 1.15 times more volatile than Cannae Holdings. It trades about -0.06 of its total potential returns per unit of risk. Cannae Holdings is currently generating about 0.05 per unit of volatility. If you would invest  1,935  in Cannae Holdings on September 19, 2024 and sell it today you would earn a total of  87.00  from holding Cannae Holdings or generate 4.5% return on investment over 90 days.

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

Stepan Company  vs.  Cannae Holdings

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.

Cannae Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cannae Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cannae Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stepan and Cannae Holdings

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

The idea behind Stepan Company and Cannae Holdings 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.