Correlation Between Sleep Number and WESTLAKE CHEMICAL
Can any of the company-specific risk be diversified away by investing in both Sleep Number 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 Sleep Number and WESTLAKE CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sleep Number Corp and WESTLAKE CHEMICAL, you can compare the effects of market volatilities on Sleep Number 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 Sleep Number with a short position of WESTLAKE CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sleep Number and WESTLAKE CHEMICAL.
Diversification Opportunities for Sleep Number and WESTLAKE CHEMICAL
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sleep and WESTLAKE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Number Corp and WESTLAKE CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLAKE CHEMICAL and Sleep Number 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 Sleep Number Corp 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 Sleep Number i.e., Sleep Number and WESTLAKE CHEMICAL go up and down completely randomly.
Pair Corralation between Sleep Number and WESTLAKE CHEMICAL
Assuming the 90 days horizon Sleep Number is expected to generate 3.5 times less return on investment than WESTLAKE CHEMICAL. In addition to that, Sleep Number is 3.07 times more volatile than WESTLAKE CHEMICAL. It trades about 0.0 of its total potential returns per unit of risk. WESTLAKE CHEMICAL is currently generating about 0.03 per unit of volatility. If you would invest 9,797 in WESTLAKE CHEMICAL on September 2, 2024 and sell it today you would earn a total of 2,403 from holding WESTLAKE CHEMICAL or generate 24.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sleep Number Corp vs. WESTLAKE CHEMICAL
Performance |
| Timeline |
| Sleep Number Corp |
| WESTLAKE CHEMICAL |
Sleep Number and WESTLAKE CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sleep Number and WESTLAKE CHEMICAL
The main advantage of trading using opposite Sleep Number and WESTLAKE CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sleep Number 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.| Sleep Number vs. Silicon Motion Technology | Sleep Number vs. Goodyear Tire Rubber | Sleep Number vs. WESTLAKE CHEMICAL | Sleep Number vs. CHEMICAL INDUSTRIES |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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