Correlation Between Westlake Chemical and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and Microchip Technology 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 Microchip Technology 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 Microchip Technology, you can compare the effects of market volatilities on Westlake Chemical and Microchip Technology 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 Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Microchip Technology.
Diversification Opportunities for Westlake Chemical and Microchip Technology
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westlake and Microchip is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Corp and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Microchip Technology go up and down completely randomly.
Pair Corralation between Westlake Chemical and Microchip Technology
Assuming the 90 days trading horizon Westlake Chemical Corp is expected to generate 0.67 times more return on investment than Microchip Technology. However, Westlake Chemical Corp is 1.48 times less risky than Microchip Technology. It trades about -0.07 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.16 per unit of risk. If you would invest 13,198 in Westlake Chemical Corp on September 2, 2024 and sell it today you would lose (334.00) from holding Westlake Chemical Corp or give up 2.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westlake Chemical Corp vs. Microchip Technology
Performance |
| Timeline |
| Westlake Chemical Corp |
| Microchip Technology |
Westlake Chemical and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and Microchip Technology
The main advantage of trading using opposite Westlake Chemical and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, Microchip Technology 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.| Westlake Chemical vs. Uniper SE | Westlake Chemical vs. Mulberry Group PLC | Westlake Chemical vs. London Security Plc | Westlake Chemical vs. Triad Group PLC |
| Microchip Technology vs. Uniper SE | Microchip Technology vs. Mulberry Group PLC | Microchip Technology vs. London Security Plc | Microchip Technology vs. Triad Group PLC |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |