Correlation Between Quaker Chemical and REX American
Can any of the company-specific risk be diversified away by investing in both Quaker Chemical and REX American 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 Quaker Chemical and REX American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quaker Chemical and REX American Resources, you can compare the effects of market volatilities on Quaker Chemical and REX American 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 Quaker Chemical with a short position of REX American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quaker Chemical and REX American.
Diversification Opportunities for Quaker Chemical and REX American
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Quaker and REX is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and REX American Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX American Resources and Quaker Chemical 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 Quaker Chemical are associated (or correlated) with REX American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX American Resources has no effect on the direction of Quaker Chemical i.e., Quaker Chemical and REX American go up and down completely randomly.
Pair Corralation between Quaker Chemical and REX American
Considering the 90-day investment horizon Quaker Chemical is expected to generate 1.54 times more return on investment than REX American. However, Quaker Chemical is 1.54 times more volatile than REX American Resources. It trades about 0.08 of its potential returns per unit of risk. REX American Resources is currently generating about -0.04 per unit of risk. If you would invest 15,450 in Quaker Chemical on August 28, 2024 and sell it today you would earn a total of 804.00 from holding Quaker Chemical or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quaker Chemical vs. REX American Resources
Performance |
| Timeline |
| Quaker Chemical |
| REX American Resources |
Quaker Chemical and REX American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quaker Chemical and REX American
The main advantage of trading using opposite Quaker Chemical and REX American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical position performs unexpectedly, REX American 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 REX American will offset losses from the drop in REX American's long position.| Quaker Chemical vs. Oil Dri | Quaker Chemical vs. H B Fuller | Quaker Chemical vs. Northern Technologies | Quaker Chemical vs. Cabot |
| REX American vs. Innospec | REX American vs. H B Fuller | REX American vs. Quaker Chemical | REX American vs. Minerals Technologies |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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