Correlation Between Stepan and Nextplat Corp

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

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

Diversification Opportunities for Stepan and Nextplat Corp

0.74

Correlation Coefficient

Stepan  Nextplat Corp

Poor diversification

The 3 months correlation between Stepan and Nextplat is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Nextplat Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextplat Corp 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 Nextplat Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextplat Corp has no effect on the direction of Stepan i.e., Stepan and Nextplat Corp go up and down completely randomly.

Pair Corralation between Stepan and Nextplat Corp

Considering the 90-day investment horizon Stepan is expected to generate 2.93 times less return on investment than Nextplat Corp. But when comparing it to its historical volatility, Stepan Company is 2.53 times less risky than Nextplat Corp. It trades about 0.1 of its potential returns per unit of risk. Nextplat Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Nextplat Corp on April 30, 2025 and sell it today you would earn a total of  19.00  from holding Nextplat Corp or generate 33.93% 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.  Nextplat Corp

Stepan Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Stepan disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nextplat Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextplat Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Nextplat Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and Nextplat Corp

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

The idea behind Stepan Company and Nextplat Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.