Correlation Between Albemarle and NewMarket
Can any of the company-specific risk be diversified away by investing in both Albemarle and NewMarket 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 Albemarle and NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Albemarle and NewMarket, you can compare the effects of market volatilities on Albemarle and NewMarket 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 Albemarle with a short position of NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle and NewMarket.
Diversification Opportunities for Albemarle and NewMarket
Poor diversification
The 3 months correlation between Albemarle and NewMarket is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket and Albemarle 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 Albemarle are associated (or correlated) with NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Albemarle i.e., Albemarle and NewMarket go up and down completely randomly.
Pair Corralation between Albemarle and NewMarket
Assuming the 90 days trading horizon Albemarle is expected to under-perform the NewMarket. In addition to that, Albemarle is 1.87 times more volatile than NewMarket. It trades about -0.02 of its total potential returns per unit of risk. NewMarket is currently generating about 0.06 per unit of volatility. If you would invest 33,306 in NewMarket on November 1, 2024 and sell it today you would earn a total of 16,512 from holding NewMarket or generate 49.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 45.75% |
| Values | Daily Returns |
Albemarle vs. NewMarket
Performance |
| Timeline |
| Albemarle |
| NewMarket |
Albemarle and NewMarket Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Albemarle and NewMarket
The main advantage of trading using opposite Albemarle and NewMarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albemarle position performs unexpectedly, NewMarket 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 NewMarket will offset losses from the drop in NewMarket's long position.| Albemarle vs. SEI Investments | Albemarle vs. Reservoir Media | Albemarle vs. Iridium Communications | Albemarle vs. Pinterest |
| NewMarket vs. H B Fuller | NewMarket vs. Minerals Technologies | NewMarket vs. Quaker Chemical | NewMarket vs. Oil Dri |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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