Correlation Between Stepan and Marfrig Global

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

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

Diversification Opportunities for Stepan and Marfrig Global

0.12

Correlation Coefficient

Stepan  Marfrig Global

Average diversification

The 3 months correlation between Stepan and Marfrig is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods 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 Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of Stepan i.e., Stepan and Marfrig Global go up and down completely randomly.

Pair Corralation between Stepan and Marfrig Global

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Marfrig Global. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.9 times less risky than Marfrig Global. The stock trades about -0.09 of its potential returns per unit of risk. The Marfrig Global Foods is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  248.00  in Marfrig Global Foods on September 21, 2024 and sell it today you would earn a total of  3.00  from holding Marfrig Global Foods or generate 1.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Stepan Company  vs.  Marfrig Global Foods

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 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.

Marfrig Global Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marfrig Global is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stepan and Marfrig Global

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

The idea behind Stepan Company and Marfrig Global Foods 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.