Correlation Between AIR PRODCHEMICALS and WESTLAKE CHEMICAL
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and WESTLAKE CHEMICAL 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 AIR PRODCHEMICALS and WESTLAKE CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and WESTLAKE CHEMICAL, you can compare the effects of market volatilities on AIR PRODCHEMICALS and WESTLAKE CHEMICAL 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 AIR PRODCHEMICALS with a short position of WESTLAKE CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and WESTLAKE CHEMICAL.
Diversification Opportunities for AIR PRODCHEMICALS and WESTLAKE CHEMICAL
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AIR and WESTLAKE is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and WESTLAKE CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLAKE CHEMICAL and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS are associated (or correlated) with WESTLAKE CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTLAKE CHEMICAL has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and WESTLAKE CHEMICAL go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and WESTLAKE CHEMICAL
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 1.69 times less return on investment than WESTLAKE CHEMICAL. But when comparing it to its historical volatility, AIR PRODCHEMICALS is 1.05 times less risky than WESTLAKE CHEMICAL. It trades about 0.03 of its potential returns per unit of risk. WESTLAKE CHEMICAL is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9,448 in WESTLAKE CHEMICAL on August 28, 2024 and sell it today you would earn a total of 3,152 from holding WESTLAKE CHEMICAL or generate 33.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. WESTLAKE CHEMICAL
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| WESTLAKE CHEMICAL |
AIR PRODCHEMICALS and WESTLAKE CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and WESTLAKE CHEMICAL
The main advantage of trading using opposite AIR PRODCHEMICALS and WESTLAKE CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL will offset losses from the drop in WESTLAKE CHEMICAL's long position.| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Microsoft | AIR PRODCHEMICALS vs. Microsoft |
| WESTLAKE CHEMICAL vs. Apple Inc | WESTLAKE CHEMICAL vs. Apple Inc | WESTLAKE CHEMICAL vs. Microsoft | WESTLAKE CHEMICAL vs. Microsoft |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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