Correlation Between Westlake Chemical and Ams AG

Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and Ams AG 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 Ams AG 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 Ams AG, you can compare the effects of market volatilities on Westlake Chemical and Ams AG 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 Ams AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Ams AG.

Diversification Opportunities for Westlake Chemical and Ams AG

-0.47

Correlation Coefficient

Westlake Chemical  Ams AG

Very good diversification

The 3 months correlation between Westlake and Ams is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Corp and Ams AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ams AG 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 Ams AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ams AG has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Ams AG go up and down completely randomly.

Pair Corralation between Westlake Chemical and Ams AG

Assuming the 90 days trading horizon Westlake Chemical Corp is expected to under-perform the Ams AG. But the stock apears to be less risky and, when comparing its historical volatility, Westlake Chemical Corp is 2.3 times less risky than Ams AG. The stock trades about -0.1 of its potential returns per unit of risk. The Ams AG is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  594.00  in Ams AG on December 28, 2024 and sell it today you would earn a total of  245.00  from holding Ams AG or generate 41.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Westlake Chemical Corp  vs.  Ams AG

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.

Ams AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ams AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ams AG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westlake Chemical and Ams AG

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

The idea behind Westlake Chemical Corp and Ams AG 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.