Correlation Between LyondellBasell Industries and TRI CHEMICAL
Can any of the company-specific risk be diversified away by investing in both LyondellBasell Industries and TRI 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 LyondellBasell Industries and TRI CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LyondellBasell Industries NV and TRI CHEMICAL LABORATINC, you can compare the effects of market volatilities on LyondellBasell Industries and TRI 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 LyondellBasell Industries with a short position of TRI CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of LyondellBasell Industries and TRI CHEMICAL.
Diversification Opportunities for LyondellBasell Industries and TRI CHEMICAL
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LyondellBasell and TRI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and TRI CHEMICAL LABORATINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRI CHEMICAL LABORATINC and LyondellBasell Industries 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 LyondellBasell Industries NV are associated (or correlated) with TRI CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRI CHEMICAL LABORATINC has no effect on the direction of LyondellBasell Industries i.e., LyondellBasell Industries and TRI CHEMICAL go up and down completely randomly.
Pair Corralation between LyondellBasell Industries and TRI CHEMICAL
Assuming the 90 days horizon LyondellBasell Industries NV is expected to under-perform the TRI CHEMICAL. But the stock apears to be less risky and, when comparing its historical volatility, LyondellBasell Industries NV is 1.82 times less risky than TRI CHEMICAL. The stock trades about -0.27 of its potential returns per unit of risk. The TRI CHEMICAL LABORATINC is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,730 in TRI CHEMICAL LABORATINC on September 25, 2024 and sell it today you would lose (80.00) from holding TRI CHEMICAL LABORATINC or give up 4.62% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.45% |
Values | Daily Returns |
LyondellBasell Industries NV vs. TRI CHEMICAL LABORATINC
Performance |
Timeline |
LyondellBasell Industries |
TRI CHEMICAL LABORATINC |
LyondellBasell Industries and TRI CHEMICAL Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LyondellBasell Industries and TRI CHEMICAL
The main advantage of trading using opposite LyondellBasell Industries and TRI CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LyondellBasell Industries position performs unexpectedly, TRI 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 TRI CHEMICAL will offset losses from the drop in TRI CHEMICAL's long position.LyondellBasell Industries vs. Linde PLC | LyondellBasell Industries vs. Air Liquide SA | LyondellBasell Industries vs. The Sherwin Williams | LyondellBasell Industries vs. Ecolab Inc |
TRI CHEMICAL vs. Linde PLC | TRI CHEMICAL vs. Air Liquide SA | TRI CHEMICAL vs. The Sherwin Williams | TRI CHEMICAL vs. Ecolab Inc |
Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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