Correlation Between Stepan and TOTAL

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

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

Diversification Opportunities for Stepan and TOTAL

-0.13

Correlation Coefficient

Stepan  TOTAL

Good diversification

The 3 months correlation between Stepan and TOTAL is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and TOTAL CAPITAL INTERNATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL CAPITAL INTERN 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 TOTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL CAPITAL INTERN has no effect on the direction of Stepan i.e., Stepan and TOTAL go up and down completely randomly.

Pair Corralation between Stepan and TOTAL

Considering the 90-day investment horizon Stepan Company is expected to under-perform the TOTAL. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 48.59 times less risky than TOTAL. The stock trades about -0.03 of its potential returns per unit of risk. The TOTAL CAPITAL INTERNATIONAL is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,648  in TOTAL CAPITAL INTERNATIONAL on September 5, 2024 and sell it today you would lose (358.00) from holding TOTAL CAPITAL INTERNATIONAL or give up 4.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.6%
Values	Daily Returns

Stepan Company  vs.  TOTAL CAPITAL INTERNATIONAL

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.

TOTAL CAPITAL INTERN

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Stepan and TOTAL

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

The idea behind Stepan Company and TOTAL CAPITAL INTERNATIONAL 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.