Correlation Between Element Solutions and RPM International
Can any of the company-specific risk be diversified away by investing in both Element Solutions and RPM International 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 RPM International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Element Solutions and RPM International, you can compare the effects of market volatilities on Element Solutions and RPM International 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 RPM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and RPM International.
Diversification Opportunities for Element Solutions and RPM International
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Element and RPM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International 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 RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of Element Solutions i.e., Element Solutions and RPM International go up and down completely randomly.
Pair Corralation between Element Solutions and RPM International
Considering the 90-day investment horizon Element Solutions is expected to generate 1.14 times less return on investment than RPM International. In addition to that, Element Solutions is 1.48 times more volatile than RPM International. It trades about 0.08 of its total potential returns per unit of risk. RPM International is currently generating about 0.13 per unit of volatility. If you would invest 10,936 in RPM International on September 1, 2024 and sell it today you would earn a total of 2,942 from holding RPM International or generate 26.9% 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. RPM International
Performance |
| Timeline |
| Element Solutions |
| RPM International |
Element Solutions and RPM International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Element Solutions and RPM International
The main advantage of trading using opposite Element Solutions and RPM International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Solutions position performs unexpectedly, RPM International 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 RPM International will offset losses from the drop in RPM International's long position.| Element Solutions vs. Oil Dri | Element Solutions vs. Quaker Chemical | Element Solutions vs. Ecovyst | Element Solutions vs. Minerals Technologies |
| RPM International vs. Innospec | RPM International vs. Minerals Technologies | RPM International vs. Oil Dri | RPM International vs. Quaker Chemical |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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