Correlation Between Westlake Chemical and PPG Industries
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and PPG Industries 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 PPG Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical and PPG Industries, you can compare the effects of market volatilities on Westlake Chemical and PPG Industries 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 PPG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and PPG Industries.
Diversification Opportunities for Westlake Chemical and PPG Industries
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westlake and PPG is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and PPG Industries go up and down completely randomly.
Pair Corralation between Westlake Chemical and PPG Industries
Considering the 90-day investment horizon Westlake Chemical is expected to generate 1.32 times more return on investment than PPG Industries. However, Westlake Chemical is 1.32 times more volatile than PPG Industries. It trades about 0.03 of its potential returns per unit of risk. PPG Industries is currently generating about 0.0 per unit of risk. If you would invest 10,381 in Westlake Chemical on August 27, 2024 and sell it today you would earn a total of 2,664 from holding Westlake Chemical or generate 25.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westlake Chemical vs. PPG Industries
Performance |
| Timeline |
| Westlake Chemical |
| PPG Industries |
Westlake Chemical and PPG Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and PPG Industries
The main advantage of trading using opposite Westlake Chemical and PPG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, PPG Industries 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 PPG Industries will offset losses from the drop in PPG Industries' long position.| Westlake Chemical vs. Sensient Technologies | Westlake Chemical vs. Innospec | Westlake Chemical vs. Minerals Technologies | Westlake Chemical vs. Oil Dri |
| PPG Industries vs. Oil Dri | PPG Industries vs. H B Fuller | PPG Industries vs. Northern Technologies | PPG Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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