Correlation Between Stepan and Albemarle
Can any of the company-specific risk be diversified away by investing in both Stepan and Albemarle 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 Albemarle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Albemarle, you can compare the effects of market volatilities on Stepan and Albemarle 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 Albemarle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Albemarle.
Diversification Opportunities for Stepan and Albemarle
Very good diversification
The 3 months correlation between Stepan and Albemarle is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Stepan i.e., Stepan and Albemarle go up and down completely randomly.
Pair Corralation between Stepan and Albemarle
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Albemarle. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.52 times less risky than Albemarle. The stock trades about -0.05 of its potential returns per unit of risk. The Albemarle is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,848 in Albemarle on June 3, 2025 and sell it today you would earn a total of 1,100 from holding Albemarle or generate 38.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Albemarle
Performance |
| Timeline |
| Stepan Company |
| Albemarle |
Stepan and Albemarle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Albemarle
The main advantage of trading using opposite Stepan and Albemarle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Albemarle 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 Albemarle will offset losses from the drop in Albemarle's long position.The idea behind Stepan Company and Albemarle 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.| Albemarle vs. Dave Busters Entertainment | Albemarle vs. Lands End | Albemarle vs. Iridium Communications | Albemarle vs. Rocky Brands |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |