Correlation Between REX American and Element Solutions
Can any of the company-specific risk be diversified away by investing in both REX American and Element Solutions 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 REX American and Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REX American Resources and Element Solutions, you can compare the effects of market volatilities on REX American and Element Solutions 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 REX American with a short position of Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of REX American and Element Solutions.
Diversification Opportunities for REX American and Element Solutions
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between REX and Element is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding REX American Resources and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and REX American 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 REX American Resources are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of REX American i.e., REX American and Element Solutions go up and down completely randomly.
Pair Corralation between REX American and Element Solutions
Considering the 90-day investment horizon REX American is expected to generate 9.1 times less return on investment than Element Solutions. In addition to that, REX American is 1.05 times more volatile than Element Solutions. It trades about 0.01 of its total potential returns per unit of risk. Element Solutions is currently generating about 0.1 per unit of volatility. If you would invest 2,615 in Element Solutions on August 28, 2024 and sell it today you would earn a total of 318.00 from holding Element Solutions or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
REX American Resources vs. Element Solutions
Performance |
| Timeline |
| REX American Resources |
| Element Solutions |
REX American and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REX American and Element Solutions
The main advantage of trading using opposite REX American and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REX American position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.| REX American vs. Lsb Industries | REX American vs. AdvanSix | REX American vs. Tronox Holdings PLC | REX American vs. Methanex |
| Element Solutions vs. Oil Dri | Element Solutions vs. H B Fuller | Element Solutions vs. Northern Technologies | Element Solutions vs. Cabot |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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