Correlation Between WD 40 and Quaker Chemical
Can any of the company-specific risk be diversified away by investing in both WD 40 and Quaker 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 WD 40 and Quaker Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WD 40 Company and Quaker Chemical, you can compare the effects of market volatilities on WD 40 and Quaker 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 WD 40 with a short position of Quaker Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and Quaker Chemical.
Diversification Opportunities for WD 40 and Quaker Chemical
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WDFC and Quaker is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 Company and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical and WD 40 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 WD 40 Company are associated (or correlated) with Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of WD 40 i.e., WD 40 and Quaker Chemical go up and down completely randomly.
Pair Corralation between WD 40 and Quaker Chemical
Given the investment horizon of 90 days WD 40 Company is expected to under-perform the Quaker Chemical. But the stock apears to be less risky and, when comparing its historical volatility, WD 40 Company is 1.14 times less risky than Quaker Chemical. The stock trades about -0.28 of its potential returns per unit of risk. The Quaker Chemical is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 14,055 in Quaker Chemical on October 20, 2024 and sell it today you would lose (418.00) from holding Quaker Chemical or give up 2.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WD 40 Company vs. Quaker Chemical
Performance |
| Timeline |
| WD 40 Company |
| Quaker Chemical |
WD 40 and Quaker Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WD 40 and Quaker Chemical
The main advantage of trading using opposite WD 40 and Quaker Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD 40 position performs unexpectedly, Quaker 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 Quaker Chemical will offset losses from the drop in Quaker Chemical's long position.The idea behind WD 40 Company and Quaker Chemical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Quaker Chemical vs. Minerals Technologies | Quaker Chemical vs. Innospec | Quaker Chemical vs. H B Fuller | Quaker Chemical vs. Cabot |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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