Correlation Between Cabot and LyondellBasell Industries
Can any of the company-specific risk be diversified away by investing in both Cabot and LyondellBasell Industries 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 Cabot and LyondellBasell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot and LyondellBasell Industries NV, you can compare the effects of market volatilities on Cabot and LyondellBasell Industries 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 Cabot with a short position of LyondellBasell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and LyondellBasell Industries.
Diversification Opportunities for Cabot and LyondellBasell Industries
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cabot and LyondellBasell is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and LyondellBasell Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LyondellBasell Industries and Cabot 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 Cabot are associated (or correlated) with LyondellBasell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LyondellBasell Industries has no effect on the direction of Cabot i.e., Cabot and LyondellBasell Industries go up and down completely randomly.
Pair Corralation between Cabot and LyondellBasell Industries
Considering the 90-day investment horizon Cabot is expected to generate 1.93 times more return on investment than LyondellBasell Industries. However, Cabot is 1.93 times more volatile than LyondellBasell Industries NV. It trades about 0.01 of its potential returns per unit of risk. LyondellBasell Industries NV is currently generating about -0.19 per unit of risk. If you would invest 11,026 in Cabot on August 27, 2024 and sell it today you would earn a total of 10.00 from holding Cabot or generate 0.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cabot vs. LyondellBasell Industries NV
Performance |
| Timeline |
| Cabot |
| LyondellBasell Industries |
Cabot and LyondellBasell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabot and LyondellBasell Industries
The main advantage of trading using opposite Cabot and LyondellBasell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot position performs unexpectedly, LyondellBasell Industries 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 LyondellBasell Industries will offset losses from the drop in LyondellBasell Industries' long position.The idea behind Cabot and LyondellBasell Industries NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| LyondellBasell Industries vs. International Flavors Fragrances | LyondellBasell Industries vs. Cabot | LyondellBasell Industries vs. Westlake Chemical | LyondellBasell Industries vs. Air Products and |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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