Correlation Between Codexis and Albemarle

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

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

Diversification Opportunities for Codexis and Albemarle

0.01

Correlation Coefficient

Codexis  Albemarle

Significant diversification

The 3 months correlation between Codexis and Albemarle is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Codexis and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle and Codexis 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 Codexis are associated (or correlated) with Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Codexis i.e., Codexis and Albemarle go up and down completely randomly.

Pair Corralation between Codexis and Albemarle

Given the investment horizon of 90 days Codexis is expected to generate 1.88 times more return on investment than Albemarle. However, Codexis is 1.88 times more volatile than Albemarle. It trades about 0.22 of its potential returns per unit of risk. Albemarle is currently generating about -0.08 per unit of risk. If you would invest  312.00  in Codexis on October 7, 2024 and sell it today you would earn a total of  231.00  from holding Codexis or generate 74.04% return on investment over 90 days.

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

Codexis  vs.  Albemarle

Codexis

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Albemarle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albemarle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Codexis and Albemarle

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

The idea behind Codexis and Albemarle 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.