Correlation Between Stepan and Jacobs Solutions

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

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

Diversification Opportunities for Stepan and Jacobs Solutions

-0.13

Correlation Coefficient

Stepan  Jacobs Solutions

Good diversification

The 3 months correlation between Stepan and Jacobs is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions 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 Jacobs Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacobs Solutions has no effect on the direction of Stepan i.e., Stepan and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Stepan and Jacobs Solutions

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Jacobs Solutions. In addition to that, Stepan is 1.77 times more volatile than Jacobs Solutions. It trades about -0.07 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about 0.24 per unit of volatility. If you would invest  12,465  in Jacobs Solutions on May 14, 2025 and sell it today you would earn a total of  2,320  from holding Jacobs Solutions or generate 18.61% 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.  Jacobs Solutions

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.

Jacobs Solutions

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and Jacobs Solutions

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

The idea behind Stepan Company and Jacobs Solutions 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..