Correlation Between RPM International and Element Solutions
Can any of the company-specific risk be diversified away by investing in both RPM International 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 RPM International and Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RPM International and Element Solutions, you can compare the effects of market volatilities on RPM International 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 RPM International with a short position of Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPM International and Element Solutions.
Diversification Opportunities for RPM International and Element Solutions
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RPM and Element is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding RPM International and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and RPM International 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 RPM International 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 RPM International i.e., RPM International and Element Solutions go up and down completely randomly.
Pair Corralation between RPM International and Element Solutions
Considering the 90-day investment horizon RPM International is expected to generate 0.67 times more return on investment than Element Solutions. However, RPM International is 1.48 times less risky than Element Solutions. It trades about 0.13 of its potential returns per unit of risk. Element Solutions is currently generating about 0.08 per unit of risk. If you would invest 10,936 in RPM International on September 1, 2024 and sell it today you would earn a total of 2,942 from holding RPM International or generate 26.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RPM International vs. Element Solutions
Performance |
| Timeline |
| RPM International |
| Element Solutions |
RPM International and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RPM International and Element Solutions
The main advantage of trading using opposite RPM International and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPM International 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.| RPM International vs. Innospec | RPM International vs. Minerals Technologies | RPM International vs. Oil Dri | RPM International vs. Quaker Chemical |
| Element Solutions vs. Oil Dri | Element Solutions vs. Quaker Chemical | Element Solutions vs. Ecovyst | Element Solutions 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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