Correlation Between Oil Dri and Stepan
Can any of the company-specific risk be diversified away by investing in both Oil Dri 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 Oil Dri and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil Dri and Stepan Company, you can compare the effects of market volatilities on Oil Dri 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 Oil Dri with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Dri and Stepan.
Diversification Opportunities for Oil Dri and Stepan
Weak diversification
The 3 months correlation between Oil and Stepan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Oil Dri and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Oil Dri 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 Oil Dri 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 Oil Dri i.e., Oil Dri and Stepan go up and down completely randomly.
Pair Corralation between Oil Dri and Stepan
Considering the 90-day investment horizon Oil Dri is expected to generate 1.4 times more return on investment than Stepan. However, Oil Dri is 1.4 times more volatile than Stepan Company. It trades about 0.17 of its potential returns per unit of risk. Stepan Company is currently generating about -0.03 per unit of risk. If you would invest 7,753 in Oil Dri on March 7, 2024 and sell it today you would earn a total of 604.00 from holding Oil Dri or generate 7.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Oil Dri vs. Stepan Company
Performance |
Timeline |
Oil Dri |
Stepan Company |
Oil Dri and Stepan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Oil Dri and Stepan
The main advantage of trading using opposite Oil Dri and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Dri 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.Oil Dri vs. H B Fuller | Oil Dri vs. Minerals Technologies | Oil Dri vs. Quaker Chemical | Oil Dri vs. Sensient Technologies |
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Check out your portfolio center.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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