Correlation Between Franco Nevada and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both Franco Nevada 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 Franco Nevada and Westlake Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franco Nevada and Westlake Chemical Partners, you can compare the effects of market volatilities on Franco Nevada 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 Franco Nevada with a short position of Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and Westlake Chemical.
Diversification Opportunities for Franco Nevada and Westlake Chemical
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franco and Westlake is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Westlake Chemical Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical and Franco Nevada 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 Franco Nevada 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 Franco Nevada i.e., Franco Nevada and Westlake Chemical go up and down completely randomly.
Pair Corralation between Franco Nevada and Westlake Chemical
Considering the 90-day investment horizon Franco Nevada is expected to under-perform the Westlake Chemical. In addition to that, Franco Nevada is 3.43 times more volatile than Westlake Chemical Partners. It trades about -0.22 of its total potential returns per unit of risk. Westlake Chemical Partners is currently generating about 0.54 per unit of volatility. If you would invest 2,198 in Westlake Chemical Partners on August 30, 2024 and sell it today you would earn a total of 174.00 from holding Westlake Chemical Partners or generate 7.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Franco Nevada vs. Westlake Chemical Partners
Performance |
| Timeline |
| Franco Nevada |
| Westlake Chemical |
Franco Nevada and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franco Nevada and Westlake Chemical
The main advantage of trading using opposite Franco Nevada and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franco Nevada 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.| Franco Nevada vs. Royal Gold | Franco Nevada vs. Agnico Eagle Mines | Franco Nevada vs. Pan American Silver | Franco Nevada vs. Sandstorm Gold Ltd |
| Westlake Chemical vs. Valhi Inc | Westlake Chemical vs. Huntsman | Westlake Chemical vs. Lsb Industries | Westlake Chemical vs. Green Plains Renewable |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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