Correlation Between WESTLAKE CHEMICAL and Motorcar Parts
Can any of the company-specific risk be diversified away by investing in both WESTLAKE CHEMICAL and Motorcar Parts 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 Motorcar Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WESTLAKE CHEMICAL and Motorcar Parts of, you can compare the effects of market volatilities on WESTLAKE CHEMICAL and Motorcar Parts 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 Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTLAKE CHEMICAL and Motorcar Parts.
Diversification Opportunities for WESTLAKE CHEMICAL and Motorcar Parts
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between WESTLAKE and Motorcar is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding WESTLAKE CHEMICAL and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts 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 Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of WESTLAKE CHEMICAL i.e., WESTLAKE CHEMICAL and Motorcar Parts go up and down completely randomly.
Pair Corralation between WESTLAKE CHEMICAL and Motorcar Parts
Assuming the 90 days trading horizon WESTLAKE CHEMICAL is expected to generate 0.39 times more return on investment than Motorcar Parts. However, WESTLAKE CHEMICAL is 2.54 times less risky than Motorcar Parts. It trades about 0.03 of its potential returns per unit of risk. Motorcar Parts of is currently generating about -0.01 per unit of risk. If you would invest 9,797 in WESTLAKE CHEMICAL on August 31, 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 | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
WESTLAKE CHEMICAL vs. Motorcar Parts of
Performance |
| Timeline |
| WESTLAKE CHEMICAL |
| Motorcar Parts |
WESTLAKE CHEMICAL and Motorcar Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WESTLAKE CHEMICAL and Motorcar Parts
The main advantage of trading using opposite WESTLAKE CHEMICAL and Motorcar Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WESTLAKE CHEMICAL position performs unexpectedly, Motorcar Parts 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 Motorcar Parts will offset losses from the drop in Motorcar Parts' long position.| WESTLAKE CHEMICAL vs. SIVERS SEMICONDUCTORS AB | WESTLAKE CHEMICAL vs. Darden Restaurants | WESTLAKE CHEMICAL vs. Reliance Steel Aluminum | WESTLAKE CHEMICAL vs. Q2M Managementberatung AG |
| Motorcar Parts vs. National Bank Holdings | Motorcar Parts vs. CHIBA BANK | Motorcar Parts vs. SOFTBANK P ADR | Motorcar Parts vs. OAKTRSPECLENDNEW |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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