Correlation Between Stepan and Vita Coco

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

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

Diversification Opportunities for Stepan and Vita Coco

0.43

Correlation Coefficient

Stepan  Vita Coco

Very weak diversification

The 3 months correlation between Stepan and Vita is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Stepan i.e., Stepan and Vita Coco go up and down completely randomly.

Pair Corralation between Stepan and Vita Coco

Considering the 90-day investment horizon Stepan Company is expected to generate 1.64 times more return on investment than Vita Coco. However, Stepan is 1.64 times more volatile than Vita Coco. It trades about 0.08 of its potential returns per unit of risk. Vita Coco is currently generating about 0.11 per unit of risk. If you would invest  7,246  in Stepan Company on September 5, 2024 and sell it today you would earn a total of  272.00  from holding Stepan Company or generate 3.75% return on investment over 90 days.

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

Stepan Company  vs.  Vita Coco

Stepan Company

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Vita Coco

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and Vita Coco

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

The idea behind Stepan Company and Vita Coco 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.