Correlation Between Westlake Chemical and GlobalData PLC

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

Diversification Opportunities for Westlake Chemical and GlobalData PLC

0.3

Correlation Coefficient

Westlake Chemical  GlobalData PLC

Weak diversification

The 3 months correlation between Westlake and GlobalData is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Corp and GlobalData PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlobalData PLC 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 GlobalData PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlobalData PLC has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and GlobalData PLC go up and down completely randomly.

Pair Corralation between Westlake Chemical and GlobalData PLC

Assuming the 90 days trading horizon Westlake Chemical is expected to generate 1.27 times less return on investment than GlobalData PLC. In addition to that, Westlake Chemical is 1.13 times more volatile than GlobalData PLC. It trades about 0.02 of its total potential returns per unit of risk. GlobalData PLC is currently generating about 0.02 per unit of volatility. If you would invest  16,524  in GlobalData PLC on October 3, 2024 and sell it today you would earn a total of  2,376  from holding GlobalData PLC or generate 14.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.72%
Values	Daily Returns

Westlake Chemical Corp  vs.  GlobalData PLC

Westlake Chemical Corp

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GlobalData PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlobalData PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GlobalData PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Westlake Chemical and GlobalData PLC

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

The idea behind Westlake Chemical Corp and GlobalData PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.