Correlation Between Westlake Chemical and British American
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and British American 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 Westlake Chemical and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical Corp and British American Tobacco, you can compare the effects of market volatilities on Westlake Chemical and British American 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 Westlake Chemical with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and British American.
Diversification Opportunities for Westlake Chemical and British American
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Westlake and British is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Corp and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Westlake Chemical 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 Westlake Chemical Corp are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and British American go up and down completely randomly.
Pair Corralation between Westlake Chemical and British American
Assuming the 90 days trading horizon Westlake Chemical Corp is expected to under-perform the British American. In addition to that, Westlake Chemical is 2.89 times more volatile than British American Tobacco. It trades about -0.03 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.64 per unit of volatility. If you would invest 3,514 in British American Tobacco on September 3, 2024 and sell it today you would earn a total of 283.00 from holding British American Tobacco or generate 8.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Westlake Chemical Corp vs. British American Tobacco
Performance |
| Timeline |
| Westlake Chemical Corp |
| British American Tobacco |
Westlake Chemical and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and British American
The main advantage of trading using opposite Westlake Chemical and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Westlake Chemical vs. Qurate Retail Series | Westlake Chemical vs. JB Hunt Transport | Westlake Chemical vs. Coor Service Management | Westlake Chemical vs. Roebuck Food Group |
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Check out your portfolio center.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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