Correlation Between Cabot and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both Cabot 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 Cabot and Westlake Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot and Westlake Chemical, you can compare the effects of market volatilities on Cabot 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 Cabot with a short position of Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and Westlake Chemical.
Diversification Opportunities for Cabot and Westlake Chemical
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cabot and Westlake is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical 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 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 Cabot i.e., Cabot and Westlake Chemical go up and down completely randomly.
Pair Corralation between Cabot and Westlake Chemical
Considering the 90-day investment horizon Cabot is expected to generate 1.21 times more return on investment than Westlake Chemical. However, Cabot is 1.21 times more volatile than Westlake Chemical. It trades about 0.08 of its potential returns per unit of risk. Westlake Chemical is currently generating about 0.01 per unit of risk. If you would invest 7,471 in Cabot on August 24, 2024 and sell it today you would earn a total of 3,396 from holding Cabot or generate 45.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cabot vs. Westlake Chemical
Performance |
| Timeline |
| Cabot |
| Westlake Chemical |
Cabot and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabot and Westlake Chemical
The main advantage of trading using opposite Cabot and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot 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.| Cabot vs. Eastman Chemical | Cabot vs. Olin Corporation | Cabot vs. LyondellBasell Industries NV | Cabot vs. Air Products and |
| Westlake Chemical vs. Sensient Technologies | Westlake Chemical vs. Innospec | Westlake Chemical vs. Minerals Technologies | Westlake Chemical 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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