Correlation Between Stepan and CVW CleanTech

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Can any of the company-specific risk be diversified away by investing in both Stepan and CVW CleanTech 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 CVW CleanTech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and CVW CleanTech, you can compare the effects of market volatilities on Stepan and CVW CleanTech 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 CVW CleanTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and CVW CleanTech.

Diversification Opportunities for Stepan and CVW CleanTech

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Stepan and CVW is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Stepan i.e., Stepan and CVW CleanTech go up and down completely randomly.

Pair Corralation between Stepan and CVW CleanTech

Considering the 90-day investment horizon Stepan Company is expected to under-perform the CVW CleanTech. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.21 times less risky than CVW CleanTech. The stock trades about -0.28 of its potential returns per unit of risk. The CVW CleanTech is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  62.00  in CVW CleanTech on September 20, 2024 and sell it today you would earn a total of  0.00  from holding CVW CleanTech or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Stepan Company  vs.  CVW CleanTech

 Performance 
       Timeline  
Stepan Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
CVW CleanTech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Stepan and CVW CleanTech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Stepan and CVW CleanTech

The main advantage of trading using opposite Stepan and CVW CleanTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, CVW CleanTech 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 CVW CleanTech will offset losses from the drop in CVW CleanTech's long position.
The idea behind Stepan Company and CVW CleanTech 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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