Correlation Between Stepan and Saia

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

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

Diversification Opportunities for Stepan and Saia

0.45

Correlation Coefficient

Stepan  Saia

Very weak diversification

The 3 months correlation between Stepan and Saia is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Saia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saia Inc 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 Saia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saia Inc has no effect on the direction of Stepan i.e., Stepan and Saia go up and down completely randomly.

Pair Corralation between Stepan and Saia

Considering the 90-day investment horizon Stepan is expected to generate 2.53 times less return on investment than Saia. But when comparing it to its historical volatility, Stepan Company is 1.49 times less risky than Saia. It trades about 0.09 of its potential returns per unit of risk. Saia Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  48,614  in Saia Inc on September 5, 2024 and sell it today you would earn a total of  5,622  from holding Saia Inc or generate 11.56% 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.  Saia Inc

Stepan Company

Risk-Adjusted Performance

2 of 100

Weak

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.

Saia Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saia Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Saia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and Saia

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

The idea behind Stepan Company and Saia Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.