Correlation Between Stepan and Iris Acquisition

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

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

Diversification Opportunities for Stepan and Iris Acquisition

-0.06

Correlation Coefficient

Stepan  Iris Acquisition

Good diversification

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

Pair Corralation between Stepan and Iris Acquisition

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Iris Acquisition. In addition to that, Stepan is 1.11 times more volatile than Iris Acquisition Corp. It trades about -0.04 of its total potential returns per unit of risk. Iris Acquisition Corp is currently generating about 0.01 per unit of volatility. If you would invest  1,030  in Iris Acquisition Corp on September 14, 2024 and sell it today you would earn a total of  21.00  from holding Iris Acquisition Corp or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.09%
Values	Daily Returns

Stepan Company  vs.  Iris Acquisition Corp

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 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.

Iris Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iris Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iris Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stepan and Iris Acquisition

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

The idea behind Stepan Company and Iris Acquisition Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.