Correlation Between Element Solutions and NewMarket
Can any of the company-specific risk be diversified away by investing in both Element Solutions 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 Element Solutions and NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Element Solutions and NewMarket, you can compare the effects of market volatilities on Element Solutions 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 Element Solutions with a short position of NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and NewMarket.
Diversification Opportunities for Element Solutions and NewMarket
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Element and NewMarket is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket and Element Solutions 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 Element Solutions 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 Element Solutions i.e., Element Solutions and NewMarket go up and down completely randomly.
Pair Corralation between Element Solutions and NewMarket
Considering the 90-day investment horizon Element Solutions is expected to generate 1.23 times more return on investment than NewMarket. However, Element Solutions is 1.23 times more volatile than NewMarket. It trades about 0.05 of its potential returns per unit of risk. NewMarket is currently generating about -0.04 per unit of risk. If you would invest 2,475 in Element Solutions on October 20, 2024 and sell it today you would earn a total of 120.00 from holding Element Solutions or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Element Solutions vs. NewMarket
Performance |
| Timeline |
| Element Solutions |
| NewMarket |
Element Solutions and NewMarket Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Element Solutions and NewMarket
The main advantage of trading using opposite Element Solutions and NewMarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Solutions 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.| Element Solutions vs. Oil Dri | Element Solutions vs. Quaker Chemical | Element Solutions vs. Ecovyst | Element Solutions vs. Minerals Technologies |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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