Correlation Between Stepan and Proficient Auto

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

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

Diversification Opportunities for Stepan and Proficient Auto

-0.07

Correlation Coefficient

Stepan  Proficient Auto

Good diversification

The 3 months correlation between Stepan and Proficient is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Proficient Auto Logistics, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proficient Auto Logi 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 Proficient Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proficient Auto Logi has no effect on the direction of Stepan i.e., Stepan and Proficient Auto go up and down completely randomly.

Pair Corralation between Stepan and Proficient Auto

Considering the 90-day investment horizon Stepan is expected to generate 4.17 times less return on investment than Proficient Auto. But when comparing it to its historical volatility, Stepan Company is 1.38 times less risky than Proficient Auto. It trades about 0.08 of its potential returns per unit of risk. Proficient Auto Logistics, is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  840.00  in Proficient Auto Logistics, on September 5, 2024 and sell it today you would earn a total of  152.00  from holding Proficient Auto Logistics, or generate 18.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Stepan Company  vs.  Proficient Auto Logistics,

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Proficient Auto Logi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Proficient Auto Logistics, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Stepan and Proficient Auto

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

The idea behind Stepan Company and Proficient Auto Logistics, 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.