Correlation Between Avient Corp and Stepan

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

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

Diversification Opportunities for Avient Corp and Stepan

0.14

Correlation Coefficient

Avient Corp  Stepan

Average diversification

The 3 months correlation between Avient and Stepan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Avient Corp and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Avient Corp 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 Avient Corp 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 Avient Corp i.e., Avient Corp and Stepan go up and down completely randomly.

Pair Corralation between Avient Corp and Stepan

Given the investment horizon of 90 days Avient Corp is expected to under-perform the Stepan. But the stock apears to be less risky and, when comparing its historical volatility, Avient Corp is 1.03 times less risky than Stepan. The stock trades about -0.03 of its potential returns per unit of risk. The Stepan Company is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8,635  in Stepan Company on March 7, 2024 and sell it today you would lose (101.00) from holding Stepan Company or give up 1.17% of portfolio value over 90 days.

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

Avient Corp  vs.  Stepan Company

Avient Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avient Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Avient Corp may actually be approaching a critical reversion point that can send shares even higher in July 2024.

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Avient Corp and Stepan

The main advantage of trading using opposite Avient Corp and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avient Corp 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 Avient Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.