Correlation Between Westlake Chemical and European Metals
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and European Metals 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 European Metals 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 European Metals Holdings, you can compare the effects of market volatilities on Westlake Chemical and European Metals 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and European Metals.
Diversification Opportunities for Westlake Chemical and European Metals
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Westlake and European is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Corp and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and European Metals go up and down completely randomly.
Pair Corralation between Westlake Chemical and European Metals
Assuming the 90 days trading horizon Westlake Chemical Corp is expected to under-perform the European Metals. But the stock apears to be less risky and, when comparing its historical volatility, Westlake Chemical Corp is 2.07 times less risky than European Metals. The stock trades about -0.07 of its potential returns per unit of risk. The European Metals Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 725.00 in European Metals Holdings on November 7, 2024 and sell it today you would earn a total of 0.00 from holding European Metals Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westlake Chemical Corp vs. European Metals Holdings
Performance |
| Timeline |
| Westlake Chemical Corp |
| European Metals Holdings |
Westlake Chemical and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and European Metals
The main advantage of trading using opposite Westlake Chemical and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' long position.| Westlake Chemical vs. JB Hunt Transport | Westlake Chemical vs. DFS Furniture PLC | Westlake Chemical vs. Monks Investment Trust | Westlake Chemical vs. Home Depot |
| European Metals vs. Tyson Foods Cl | European Metals vs. Ross Stores | European Metals vs. Geely Automobile Holdings | European Metals vs. Aeorema Communications 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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