Correlation Between PUBLIC and Stepan

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

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

Diversification Opportunities for PUBLIC and Stepan

0.02

Correlation Coefficient

PUBLIC  Stepan

Significant diversification

The 3 months correlation between PUBLIC and Stepan is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding PUBLIC SVC O and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and PUBLIC 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 PUBLIC SVC O 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 PUBLIC i.e., PUBLIC and Stepan go up and down completely randomly.

Pair Corralation between PUBLIC and Stepan

Assuming the 90 days trading horizon PUBLIC SVC O is expected to under-perform the Stepan. But the bond apears to be less risky and, when comparing its historical volatility, PUBLIC SVC O is 1.32 times less risky than Stepan. The bond trades about -0.09 of its potential returns per unit of risk. The Stepan Company is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,419  in Stepan Company on September 14, 2024 and sell it today you would lose (110.00) from holding Stepan Company or give up 1.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	73.44%
Values	Daily Returns

PUBLIC SVC O  vs.  Stepan Company

PUBLIC SVC O

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC SVC O has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PUBLIC SVC O investors.

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 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.

Pair Trading with PUBLIC and Stepan

The main advantage of trading using opposite PUBLIC and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PUBLIC 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 PUBLIC SVC O 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.