Correlation Between Stepan and Eagle Financial

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

By analyzing existing cross correlation between Stepan Company and Eagle Financial Services, you can compare the effects of market volatilities on Stepan and Eagle Financial 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 Eagle Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Eagle Financial.

Diversification Opportunities for Stepan and Eagle Financial

0.43

Correlation Coefficient

Stepan  Eagle Financial

Very weak diversification

The 3 months correlation between Stepan and Eagle is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Eagle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Financial Services 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 Eagle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Financial Services has no effect on the direction of Stepan i.e., Stepan and Eagle Financial go up and down completely randomly.

Pair Corralation between Stepan and Eagle Financial

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Eagle Financial. In addition to that, Stepan is 1.44 times more volatile than Eagle Financial Services. It trades about -0.05 of its total potential returns per unit of risk. Eagle Financial Services is currently generating about 0.11 per unit of volatility. If you would invest  3,027  in Eagle Financial Services on May 2, 2025 and sell it today you would earn a total of  307.00  from holding Eagle Financial Services or generate 10.14% return on investment over 90 days.

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

Stepan Company  vs.  Eagle Financial Services

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 latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Eagle Financial Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Eagle Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Stepan and Eagle Financial

The main advantage of trading using opposite Stepan and Eagle Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Eagle Financial 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 Eagle Financial will offset losses from the drop in Eagle Financial's long position.

The idea behind Stepan Company and Eagle Financial Services 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.