Correlation Between Albemarle Corp and RPM International

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

By analyzing existing cross correlation between Albemarle Corp and RPM International, you can compare the effects of market volatilities on Albemarle Corp and RPM International 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 Albemarle Corp with a short position of RPM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle Corp and RPM International.

Diversification Opportunities for Albemarle Corp and RPM International

0.82

Correlation Coefficient

Albemarle Corp  RPM International

Very poor diversification

The 3 months correlation between Albemarle and RPM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle Corp and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International and Albemarle Corp 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 Albemarle Corp are associated (or correlated) with RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of Albemarle Corp i.e., Albemarle Corp and RPM International go up and down completely randomly.

Pair Corralation between Albemarle Corp and RPM International

Considering the 90-day investment horizon Albemarle Corp is expected to under-perform the RPM International. In addition to that, Albemarle Corp is 2.11 times more volatile than RPM International. It trades about -0.04 of its total potential returns per unit of risk. RPM International is currently generating about 0.04 per unit of volatility. If you would invest  9,441  in RPM International on September 22, 2024 and sell it today you would earn a total of  3,088  from holding RPM International or generate 32.71% return on investment over 90 days.

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

Albemarle Corp  vs.  RPM International

Albemarle Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Albemarle Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RPM International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RPM International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RPM International is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Albemarle Corp and RPM International

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

The idea behind Albemarle Corp and RPM International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.