Correlation Between Westlake Chemical and EDISON INTL
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and EDISON INTL 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 Westlake Chemical and EDISON INTL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical and EDISON INTL, you can compare the effects of market volatilities on Westlake Chemical and EDISON INTL 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 Westlake Chemical with a short position of EDISON INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and EDISON INTL.
Diversification Opportunities for Westlake Chemical and EDISON INTL
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westlake and EDISON is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and EDISON INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDISON INTL and Westlake 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 Westlake Chemical are associated (or correlated) with EDISON INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDISON INTL has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and EDISON INTL go up and down completely randomly.
Pair Corralation between Westlake Chemical and EDISON INTL
Assuming the 90 days horizon Westlake Chemical is expected to generate 7.85 times less return on investment than EDISON INTL. In addition to that, Westlake Chemical is 1.12 times more volatile than EDISON INTL. It trades about 0.04 of its total potential returns per unit of risk. EDISON INTL is currently generating about 0.38 per unit of volatility. If you would invest 7,392 in EDISON INTL on September 3, 2024 and sell it today you would earn a total of 922.00 from holding EDISON INTL or generate 12.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westlake Chemical vs. EDISON INTL
Performance |
| Timeline |
| Westlake Chemical |
| EDISON INTL |
Westlake Chemical and EDISON INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and EDISON INTL
The main advantage of trading using opposite Westlake Chemical and EDISON INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, EDISON INTL 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 EDISON INTL will offset losses from the drop in EDISON INTL's long position.| Westlake Chemical vs. The Sherwin Williams | Westlake Chemical vs. Dupont De Nemours | Westlake Chemical vs. Superior Plus Corp | Westlake Chemical vs. NMI Holdings |
| EDISON INTL vs. SEI INVESTMENTS | EDISON INTL vs. Gladstone Investment | EDISON INTL vs. Westlake Chemical | EDISON INTL vs. Japan Asia Investment |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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