Correlation Between PPG Industries and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both PPG Industries 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 PPG Industries and Westlake Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PPG Industries and Westlake Chemical, you can compare the effects of market volatilities on PPG Industries 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 PPG Industries with a short position of Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPG Industries and Westlake Chemical.
Diversification Opportunities for PPG Industries and Westlake Chemical
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PPG and Westlake is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PPG Industries and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical and PPG Industries 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 PPG Industries 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 PPG Industries i.e., PPG Industries and Westlake Chemical go up and down completely randomly.
Pair Corralation between PPG Industries and Westlake Chemical
Considering the 90-day investment horizon PPG Industries is expected to under-perform the Westlake Chemical. But the stock apears to be less risky and, when comparing its historical volatility, PPG Industries is 1.41 times less risky than Westlake Chemical. The stock trades about -0.16 of its potential returns per unit of risk. The Westlake Chemical is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 13,386 in Westlake Chemical on August 27, 2024 and sell it today you would lose (341.00) from holding Westlake Chemical or give up 2.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PPG Industries vs. Westlake Chemical
Performance |
| Timeline |
| PPG Industries |
| Westlake Chemical |
PPG Industries and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PPG Industries and Westlake Chemical
The main advantage of trading using opposite PPG Industries and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPG Industries 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.| PPG Industries vs. Oil Dri | PPG Industries vs. H B Fuller | PPG Industries vs. Northern Technologies | PPG Industries vs. Cabot |
| Westlake Chemical vs. Sensient Technologies | Westlake Chemical vs. Innospec | Westlake Chemical vs. Minerals Technologies | Westlake Chemical 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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