Correlation Between WESTLAKE CHEMICAL and Tanaka CoLtd
Can any of the company-specific risk be diversified away by investing in both WESTLAKE CHEMICAL and Tanaka CoLtd 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 Tanaka CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WESTLAKE CHEMICAL and Tanaka CoLtd, you can compare the effects of market volatilities on WESTLAKE CHEMICAL and Tanaka CoLtd 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 Tanaka CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTLAKE CHEMICAL and Tanaka CoLtd.
Diversification Opportunities for WESTLAKE CHEMICAL and Tanaka CoLtd
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WESTLAKE and Tanaka is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding WESTLAKE CHEMICAL and Tanaka CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanaka CoLtd 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 Tanaka CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanaka CoLtd has no effect on the direction of WESTLAKE CHEMICAL i.e., WESTLAKE CHEMICAL and Tanaka CoLtd go up and down completely randomly.
Pair Corralation between WESTLAKE CHEMICAL and Tanaka CoLtd
Assuming the 90 days trading horizon WESTLAKE CHEMICAL is expected to generate 1.45 times less return on investment than Tanaka CoLtd. But when comparing it to its historical volatility, WESTLAKE CHEMICAL is 1.38 times less risky than Tanaka CoLtd. It trades about 0.02 of its potential returns per unit of risk. Tanaka CoLtd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 400.00 in Tanaka CoLtd on September 12, 2024 and sell it today you would earn a total of 16.00 from holding Tanaka CoLtd or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WESTLAKE CHEMICAL vs. Tanaka CoLtd
Performance |
| Timeline |
| WESTLAKE CHEMICAL |
| Tanaka CoLtd |
WESTLAKE CHEMICAL and Tanaka CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WESTLAKE CHEMICAL and Tanaka CoLtd
The main advantage of trading using opposite WESTLAKE CHEMICAL and Tanaka CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WESTLAKE CHEMICAL position performs unexpectedly, Tanaka CoLtd 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 Tanaka CoLtd will offset losses from the drop in Tanaka CoLtd's long position.| WESTLAKE CHEMICAL vs. Apple Inc | WESTLAKE CHEMICAL vs. Apple Inc | WESTLAKE CHEMICAL vs. Apple Inc | WESTLAKE CHEMICAL vs. Apple Inc |
| Tanaka CoLtd vs. Perseus Mining Limited | Tanaka CoLtd vs. Gaztransport Technigaz SA | Tanaka CoLtd vs. Gold Road Resources | Tanaka CoLtd vs. ScanSource |
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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