Correlation Between Stepan and Linde Plc
Can any of the company-specific risk be diversified away by investing in both Stepan and Linde Plc 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 Linde Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Linde plc Ordinary, you can compare the effects of market volatilities on Stepan and Linde Plc 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 Linde Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Linde Plc.
Diversification Opportunities for Stepan and Linde Plc
Poor diversification
The 3 months correlation between Stepan and Linde is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Linde plc Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc Ordinary 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc Ordinary has no effect on the direction of Stepan i.e., Stepan and Linde Plc go up and down completely randomly.
Pair Corralation between Stepan and Linde Plc
Considering the 90-day investment horizon Stepan Company is expected to generate 2.35 times more return on investment than Linde Plc. However, Stepan is 2.35 times more volatile than Linde plc Ordinary. It trades about 0.16 of its potential returns per unit of risk. Linde plc Ordinary is currently generating about 0.07 per unit of risk. If you would invest 4,683 in Stepan Company on April 19, 2025 and sell it today you would earn a total of 1,046 from holding Stepan Company or generate 22.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Linde plc Ordinary
Performance |
| Timeline |
| Stepan Company |
| Linde plc Ordinary |
Stepan and Linde Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Linde Plc
The main advantage of trading using opposite Stepan and Linde Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Linde Plc 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 Linde Plc will offset losses from the drop in Linde Plc's long position.The idea behind Stepan Company and Linde plc Ordinary 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.| Linde Plc vs. Air Products and | Linde Plc vs. PPG Industries | Linde Plc vs. Sherwin Williams Co | Linde Plc vs. Ecolab Inc |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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