Correlation Between Stepan and 51Talk Online

Can any of the company-specific risk be diversified away by investing in both Stepan and 51Talk Online 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 51Talk Online into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stepan Company and 51Talk Online Education, you can compare the effects of market volatilities on Stepan and 51Talk Online 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 51Talk Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and 51Talk Online.

Diversification Opportunities for Stepan and 51Talk Online

0.06

Correlation Coefficient

Stepan  51Talk Online

Significant diversification

The 3 months correlation between Stepan and 51Talk is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and 51Talk Online Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 51Talk Online Education 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 51Talk Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 51Talk Online Education has no effect on the direction of Stepan i.e., Stepan and 51Talk Online go up and down completely randomly.

Pair Corralation between Stepan and 51Talk Online

Considering the 90-day investment horizon Stepan Company is expected to generate 0.32 times more return on investment than 51Talk Online. However, Stepan Company is 3.12 times less risky than 51Talk Online. It trades about -0.06 of its potential returns per unit of risk. 51Talk Online Education is currently generating about -0.07 per unit of risk. If you would invest  7,668  in Stepan Company on September 13, 2024 and sell it today you would lose (118.00) from holding Stepan Company or give up 1.54% 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.  51Talk Online Education

Stepan Company

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 2 (%) 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 current stock price mess, may contribute to short-term losses for the institutional investors.

51Talk Online Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 51Talk Online Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Stepan and 51Talk Online

The main advantage of trading using opposite Stepan and 51Talk Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, 51Talk Online 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 51Talk Online will offset losses from the drop in 51Talk Online's long position.

The idea behind Stepan Company and 51Talk Online Education 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.