Correlation Between AdvanSix and Westlake Chemical

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

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

Diversification Opportunities for AdvanSix and Westlake Chemical

0.34

Correlation Coefficient

AdvanSix  Westlake Chemical

Weak diversification

The 3 months correlation between AdvanSix and Westlake is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding AdvanSix and Westlake Chemical Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical and AdvanSix 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 AdvanSix are associated (or correlated) with Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical has no effect on the direction of AdvanSix i.e., AdvanSix and Westlake Chemical go up and down completely randomly.

Pair Corralation between AdvanSix and Westlake Chemical

Given the investment horizon of 90 days AdvanSix is expected to under-perform the Westlake Chemical. In addition to that, AdvanSix is 3.12 times more volatile than Westlake Chemical Partners. It trades about -0.13 of its total potential returns per unit of risk. Westlake Chemical Partners is currently generating about 0.04 per unit of volatility. If you would invest  2,269  in Westlake Chemical Partners on December 30, 2024 and sell it today you would earn a total of  39.00  from holding Westlake Chemical Partners or generate 1.72% return on investment over 90 days.

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

AdvanSix  vs.  Westlake Chemical Partners

AdvanSix

Risk-Adjusted Performance

Very Weak

Over the last 90 days AdvanSix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Westlake Chemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westlake Chemical Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Westlake Chemical is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AdvanSix and Westlake Chemical

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

The idea behind AdvanSix and Westlake Chemical Partners 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.