Correlation Between Stepan and Genuine Parts

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

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

Diversification Opportunities for Stepan and Genuine Parts

-0.1

Correlation Coefficient

Stepan  Genuine Parts

Good diversification

The 3 months correlation between Stepan and Genuine is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Stepan i.e., Stepan and Genuine Parts go up and down completely randomly.

Pair Corralation between Stepan and Genuine Parts

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Genuine Parts. In addition to that, Stepan is 1.35 times more volatile than Genuine Parts Co. It trades about -0.05 of its total potential returns per unit of risk. Genuine Parts Co is currently generating about 0.15 per unit of volatility. If you would invest  11,646  in Genuine Parts Co on May 9, 2025 and sell it today you would earn a total of  1,751  from holding Genuine Parts Co or generate 15.04% 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.  Genuine Parts Co

Stepan Company

Risk-Adjusted Performance

Weakest

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.

Genuine Parts

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Genuine Parts exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and Genuine Parts

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

The idea behind Stepan Company and Genuine Parts Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.