Correlation Between Westlake Chemical and FMC
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and FMC 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 FMC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical Partners and FMC Corporation, you can compare the effects of market volatilities on Westlake Chemical and FMC 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 FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and FMC.
Diversification Opportunities for Westlake Chemical and FMC
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westlake and FMC is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Partners and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation 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 Partners are associated (or correlated) with FMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FMC Corporation has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and FMC go up and down completely randomly.
Pair Corralation between Westlake Chemical and FMC
Given the investment horizon of 90 days Westlake Chemical Partners is expected to generate 0.26 times more return on investment than FMC. However, Westlake Chemical Partners is 3.85 times less risky than FMC. It trades about 0.08 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.03 per unit of risk. If you would invest 2,112 in Westlake Chemical Partners on November 9, 2024 and sell it today you would earn a total of 378.00 from holding Westlake Chemical Partners or generate 17.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westlake Chemical Partners vs. FMC Corp.
Performance |
| Timeline |
| Westlake Chemical |
| FMC Corporation |
Westlake Chemical and FMC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and FMC
The main advantage of trading using opposite Westlake Chemical and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, FMC 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 FMC will offset losses from the drop in FMC's long position.| Westlake Chemical vs. Valhi Inc | Westlake Chemical vs. Huntsman | Westlake Chemical vs. Lsb Industries | Westlake Chemical vs. Green Plains Renewable |
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 Stocks Directory module to find actively traded stocks across global markets.
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