Correlation Between Westlake Chemical and Chocoladefabriken

Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and Chocoladefabriken 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 Chocoladefabriken into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Westlake Chemical Corp and Chocoladefabriken Lindt Spruengli, you can compare the effects of market volatilities on Westlake Chemical and Chocoladefabriken 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 Chocoladefabriken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Chocoladefabriken.

Diversification Opportunities for Westlake Chemical and Chocoladefabriken

-0.71

Correlation Coefficient

Westlake Chemical  Chocoladefabriken

Pay attention - limited upside

The 3 months correlation between Westlake and Chocoladefabriken is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Corp and Chocoladefabriken Lindt Spruen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chocoladefabriken Lindt 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 Corp are associated (or correlated) with Chocoladefabriken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chocoladefabriken Lindt has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Chocoladefabriken go up and down completely randomly.

Pair Corralation between Westlake Chemical and Chocoladefabriken

Assuming the 90 days trading horizon Westlake Chemical Corp is expected to under-perform the Chocoladefabriken. In addition to that, Westlake Chemical is 1.27 times more volatile than Chocoladefabriken Lindt Spruengli. It trades about -0.1 of its total potential returns per unit of risk. Chocoladefabriken Lindt Spruengli is currently generating about 0.17 per unit of volatility. If you would invest  10,000,000  in Chocoladefabriken Lindt Spruengli on December 29, 2024 and sell it today you would earn a total of  1,600,000  from holding Chocoladefabriken Lindt Spruengli or generate 16.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Westlake Chemical Corp  vs.  Chocoladefabriken Lindt Spruen

Westlake Chemical Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westlake Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Chocoladefabriken Lindt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chocoladefabriken Lindt Spruengli are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Chocoladefabriken unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westlake Chemical and Chocoladefabriken

The main advantage of trading using opposite Westlake Chemical and Chocoladefabriken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, Chocoladefabriken 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 Chocoladefabriken will offset losses from the drop in Chocoladefabriken's long position.

The idea behind Westlake Chemical Corp and Chocoladefabriken Lindt Spruengli 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.