Correlation Between Westlake Chemical and Young Cos

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

Diversification Opportunities for Westlake Chemical and Young Cos

-0.41

Correlation Coefficient

Westlake Chemical  Young Cos

Very good diversification

The 3 months correlation between Westlake and Young is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Corp and Young Cos Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Young Cos Brewery 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 Young Cos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Young Cos Brewery has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Young Cos go up and down completely randomly.

Pair Corralation between Westlake Chemical and Young Cos

Assuming the 90 days trading horizon Westlake Chemical Corp is expected to generate 1.14 times more return on investment than Young Cos. However, Westlake Chemical is 1.14 times more volatile than Young Cos Brewery. It trades about 0.04 of its potential returns per unit of risk. Young Cos Brewery is currently generating about 0.02 per unit of risk. If you would invest  9,864  in Westlake Chemical Corp on September 5, 2024 and sell it today you would earn a total of  2,906  from holding Westlake Chemical Corp or generate 29.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.91%
Values	Daily Returns

Westlake Chemical Corp  vs.  Young Cos Brewery

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 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.

Young Cos Brewery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Young Cos Brewery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Young Cos 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 Young Cos

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

The idea behind Westlake Chemical Corp and Young Cos Brewery 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.