Correlation Between FARO Technologies and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both FARO Technologies 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 FARO Technologies and Westlake Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and Westlake Chemical, you can compare the effects of market volatilities on FARO Technologies 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 FARO Technologies with a short position of Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and Westlake Chemical.
Diversification Opportunities for FARO Technologies and Westlake Chemical
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between FARO and Westlake is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical and FARO Technologies 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 FARO Technologies 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 FARO Technologies i.e., FARO Technologies and Westlake Chemical go up and down completely randomly.
Pair Corralation between FARO Technologies and Westlake Chemical
Assuming the 90 days horizon FARO Technologies is expected to generate 1.54 times more return on investment than Westlake Chemical. However, FARO Technologies is 1.54 times more volatile than Westlake Chemical. It trades about -0.02 of its potential returns per unit of risk. Westlake Chemical is currently generating about -0.09 per unit of risk. If you would invest 2,620 in FARO Technologies on September 13, 2024 and sell it today you would lose (40.00) from holding FARO Technologies or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. Westlake Chemical
Performance |
| Timeline |
| FARO Technologies |
| Westlake Chemical |
FARO Technologies and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and Westlake Chemical
The main advantage of trading using opposite FARO Technologies and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies 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.| FARO Technologies vs. HEXAGON AB ADR1 | FARO Technologies vs. Superior Plus Corp | FARO Technologies vs. SIVERS SEMICONDUCTORS AB | FARO Technologies vs. NorAm Drilling AS |
| Westlake Chemical vs. Albemarle | Westlake Chemical vs. Superior Plus Corp | Westlake Chemical vs. SIVERS SEMICONDUCTORS AB | Westlake Chemical vs. Norsk Hydro ASA |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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