Correlation Between Stepan and Lindblad Expeditions

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

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

Diversification Opportunities for Stepan and Lindblad Expeditions

0.4

Correlation Coefficient

Stepan  Lindblad Expeditions

Very weak diversification

The 3 months correlation between Stepan and Lindblad is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Lindblad Expeditions Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindblad Expeditions 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 Lindblad Expeditions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindblad Expeditions has no effect on the direction of Stepan i.e., Stepan and Lindblad Expeditions go up and down completely randomly.

Pair Corralation between Stepan and Lindblad Expeditions

Considering the 90-day investment horizon Stepan is expected to generate 186.58 times less return on investment than Lindblad Expeditions. But when comparing it to its historical volatility, Stepan Company is 2.56 times less risky than Lindblad Expeditions. It trades about 0.0 of its potential returns per unit of risk. Lindblad Expeditions Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  996.00  in Lindblad Expeditions Holdings on September 15, 2024 and sell it today you would earn a total of  180.00  from holding Lindblad Expeditions Holdings or generate 18.07% 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.  Lindblad Expeditions 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 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.

Lindblad Expeditions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lindblad Expeditions Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lindblad Expeditions exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and Lindblad Expeditions

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

The idea behind Stepan Company and Lindblad Expeditions 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.