Correlation Between Stepan and Rightmove Plc

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

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

Diversification Opportunities for Stepan and Rightmove Plc

0.02

Correlation Coefficient

Stepan  Rightmove Plc

Significant diversification

The 3 months correlation between Stepan and Rightmove is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Rightmove plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rightmove plc 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 Rightmove Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rightmove plc has no effect on the direction of Stepan i.e., Stepan and Rightmove Plc go up and down completely randomly.

Pair Corralation between Stepan and Rightmove Plc

Considering the 90-day investment horizon Stepan Company is expected to generate 1.16 times more return on investment than Rightmove Plc. However, Stepan is 1.16 times more volatile than Rightmove plc. It trades about -0.08 of its potential returns per unit of risk. Rightmove plc is currently generating about -0.14 per unit of risk. If you would invest  7,548  in Stepan Company on September 20, 2024 and sell it today you would lose (715.00) from holding Stepan Company or give up 9.47% of portfolio value over 90 days.

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

Stepan Company  vs.  Rightmove plc

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.

Rightmove plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rightmove plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Stepan and Rightmove Plc

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

The idea behind Stepan Company and Rightmove plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.