Correlation Between Suntory Beverage and Stepan

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

By analyzing existing cross correlation between Suntory Beverage Food and Stepan Company, you can compare the effects of market volatilities on Suntory Beverage and Stepan 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 Suntory Beverage with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suntory Beverage and Stepan.

Diversification Opportunities for Suntory Beverage and Stepan

0.14

Correlation Coefficient

Suntory Beverage  Stepan

Average diversification

The 3 months correlation between Suntory and Stepan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Suntory Beverage Food and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Suntory Beverage 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 Suntory Beverage Food are associated (or correlated) with Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Suntory Beverage i.e., Suntory Beverage and Stepan go up and down completely randomly.

Pair Corralation between Suntory Beverage and Stepan

Assuming the 90 days horizon Suntory Beverage Food is expected to under-perform the Stepan. But the pink sheet apears to be less risky and, when comparing its historical volatility, Suntory Beverage Food is 1.29 times less risky than Stepan. The pink sheet trades about -0.19 of its potential returns per unit of risk. The Stepan Company is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,206  in Stepan Company on September 12, 2024 and sell it today you would earn a total of  396.00  from holding Stepan Company or generate 5.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Suntory Beverage Food  vs.  Stepan Company

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Stepan Company

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 4 (%) 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Suntory Beverage and Stepan

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

The idea behind Suntory Beverage Food and Stepan Company 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.