Correlation Between Chesapeake Finl and Stepan

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

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

Diversification Opportunities for Chesapeake Finl and Stepan

0.35

Correlation Coefficient

Chesapeake Finl  Stepan

Weak diversification

The 3 months correlation between Chesapeake and Stepan is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Finl Shs and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Chesapeake Finl 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 Chesapeake Finl Shs 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 Chesapeake Finl i.e., Chesapeake Finl and Stepan go up and down completely randomly.

Pair Corralation between Chesapeake Finl and Stepan

Given the investment horizon of 90 days Chesapeake Finl Shs is expected to generate 0.59 times more return on investment than Stepan. However, Chesapeake Finl Shs is 1.68 times less risky than Stepan. It trades about 0.17 of its potential returns per unit of risk. Stepan Company is currently generating about -0.04 per unit of risk. If you would invest  1,934  in Chesapeake Finl Shs on May 3, 2025 and sell it today you would earn a total of  266.00  from holding Chesapeake Finl Shs or generate 13.75% return on investment over 90 days.

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

Chesapeake Finl Shs  vs.  Stepan Company

Chesapeake Finl Shs

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Finl Shs are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Chesapeake Finl reported solid returns over the last few months and may actually be approaching a breakup point.

Stepan Company

Risk-Adjusted Performance

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 Chesapeake Finl and Stepan

The main advantage of trading using opposite Chesapeake Finl and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Finl 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 Chesapeake Finl Shs 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.