Correlation Between LyondellBasell Industries and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both LyondellBasell Industries 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 LyondellBasell Industries and Westlake Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LyondellBasell Industries NV and Westlake Chemical, you can compare the effects of market volatilities on LyondellBasell Industries 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 LyondellBasell Industries with a short position of Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LyondellBasell Industries and Westlake Chemical.
Diversification Opportunities for LyondellBasell Industries and Westlake Chemical
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LyondellBasell and Westlake is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical and LyondellBasell Industries 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 LyondellBasell Industries NV 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 LyondellBasell Industries i.e., LyondellBasell Industries and Westlake Chemical go up and down completely randomly.
Pair Corralation between LyondellBasell Industries and Westlake Chemical
Assuming the 90 days horizon LyondellBasell Industries NV is expected to under-perform the Westlake Chemical. In addition to that, LyondellBasell Industries is 1.31 times more volatile than Westlake Chemical. It trades about -0.02 of its total potential returns per unit of risk. Westlake Chemical is currently generating about 0.02 per unit of volatility. If you would invest 12,049 in Westlake Chemical on September 1, 2024 and sell it today you would earn a total of 51.00 from holding Westlake Chemical or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LyondellBasell Industries NV vs. Westlake Chemical
Performance |
| Timeline |
| LyondellBasell Industries |
| Westlake Chemical |
LyondellBasell Industries and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LyondellBasell Industries and Westlake Chemical
The main advantage of trading using opposite LyondellBasell Industries and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LyondellBasell Industries 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.| LyondellBasell Industries vs. The Sherwin Williams | LyondellBasell Industries vs. SIKA AG UNSPADR | LyondellBasell Industries vs. Albemarle |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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