Correlation Between Stepan and Playtika Holding

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

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

Diversification Opportunities for Stepan and Playtika Holding

0.46

Correlation Coefficient

Stepan  Playtika Holding

Very weak diversification

The 3 months correlation between Stepan and Playtika is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Playtika Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtika Holding 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 Playtika Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtika Holding Corp has no effect on the direction of Stepan i.e., Stepan and Playtika Holding go up and down completely randomly.

Pair Corralation between Stepan and Playtika Holding

Considering the 90-day investment horizon Stepan Company is expected to generate 0.93 times more return on investment than Playtika Holding. However, Stepan Company is 1.08 times less risky than Playtika Holding. It trades about -0.09 of its potential returns per unit of risk. Playtika Holding Corp is currently generating about -0.11 per unit of risk. If you would invest  7,601  in Stepan Company on September 14, 2024 and sell it today you would lose (187.00) from holding Stepan Company or give up 2.46% of portfolio value over 90 days.

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

Stepan Company  vs.  Playtika Holding Corp

Stepan Company

Risk-Adjusted Performance

0 of 100

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.

Playtika Holding Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtika Holding Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Playtika Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stepan and Playtika Holding

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

The idea behind Stepan Company and Playtika Holding 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.