Correlation Between WD 40 and Stepan

Can any of the company-specific risk be diversified away by investing in both WD 40 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 WD 40 and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WD 40 Company and Stepan Company, you can compare the effects of market volatilities on WD 40 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 WD 40 with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and Stepan.

Diversification Opportunities for WD 40 and Stepan

0.56

Correlation Coefficient

WD 40  Stepan

Very weak diversification

The 3 months correlation between WDFC and Stepan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 Company and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and WD 40 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 WD 40 Company 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 WD 40 i.e., WD 40 and Stepan go up and down completely randomly.

Pair Corralation between WD 40 and Stepan

Given the investment horizon of 90 days WD 40 Company is expected to under-perform the Stepan. But the stock apears to be less risky and, when comparing its historical volatility, WD 40 Company is 1.42 times less risky than Stepan. The stock trades about -0.35 of its potential returns per unit of risk. The Stepan Company is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,568  in Stepan Company on April 13, 2025 and sell it today you would earn a total of  334.00  from holding Stepan Company or generate 6.0% return on investment over 90 days.

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

WD 40 Company  vs.  Stepan Company

WD 40 Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days WD 40 Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WD 40 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Stepan Company

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 13 (%) 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.

Pair Trading with WD 40 and Stepan

The main advantage of trading using opposite WD 40 and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD 40 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 WD 40 Company 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.