Correlation Between Westlake Chemical and Olin
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and Olin 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 Olin 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 Olin Corporation, you can compare the effects of market volatilities on Westlake Chemical and Olin 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 Olin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Olin.
Diversification Opportunities for Westlake Chemical and Olin
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westlake and Olin is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Partners and Olin Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olin 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 Olin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olin has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Olin go up and down completely randomly.
Pair Corralation between Westlake Chemical and Olin
Given the investment horizon of 90 days Westlake Chemical Partners is expected to generate 0.23 times more return on investment than Olin. However, Westlake Chemical Partners is 4.38 times less risky than Olin. It trades about 0.52 of its potential returns per unit of risk. Olin Corporation is currently generating about -0.22 per unit of risk. If you would invest 2,260 in Westlake Chemical Partners on September 13, 2024 and sell it today you would earn a total of 140.00 from holding Westlake Chemical Partners or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westlake Chemical Partners vs. Olin Corp.
Performance |
| Timeline |
| Westlake Chemical |
| Olin |
Westlake Chemical and Olin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and Olin
The main advantage of trading using opposite Westlake Chemical and Olin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, Olin 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 Olin will offset losses from the drop in Olin'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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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