Correlation Between Westlake Chemical and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and Micron Technology 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 Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical and Micron Technology, you can compare the effects of market volatilities on Westlake Chemical and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Micron Technology.
Diversification Opportunities for Westlake Chemical and Micron Technology
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Westlake and Micron is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Micron Technology go up and down completely randomly.
Pair Corralation between Westlake Chemical and Micron Technology
Assuming the 90 days horizon Westlake Chemical is expected to generate 0.54 times more return on investment than Micron Technology. However, Westlake Chemical is 1.84 times less risky than Micron Technology. It trades about -0.15 of its potential returns per unit of risk. Micron Technology is currently generating about -0.16 per unit of risk. If you would invest 12,149 in Westlake Chemical on September 12, 2024 and sell it today you would lose (549.00) from holding Westlake Chemical or give up 4.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westlake Chemical vs. Micron Technology
Performance |
| Timeline |
| Westlake Chemical |
| Micron Technology |
Westlake Chemical and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and Micron Technology
The main advantage of trading using opposite Westlake Chemical and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.| Westlake Chemical vs. Albemarle | Westlake Chemical vs. Superior Plus Corp | Westlake Chemical vs. SIVERS SEMICONDUCTORS AB | Westlake Chemical vs. Norsk Hydro ASA |
| Micron Technology vs. Sumitomo Rubber Industries | Micron Technology vs. Sixt Leasing SE | Micron Technology vs. GOODYEAR T RUBBER | Micron Technology vs. United Utilities Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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