Correlation Between Element Solutions and Koppers Holdings

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

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

Diversification Opportunities for Element Solutions and Koppers Holdings

0.86

Correlation Coefficient

Element Solutions  Koppers Holdings

Very poor diversification

The 3 months correlation between Element and Koppers is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and Koppers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koppers Holdings and Element Solutions 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 Element Solutions are associated (or correlated) with Koppers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koppers Holdings has no effect on the direction of Element Solutions i.e., Element Solutions and Koppers Holdings go up and down completely randomly.

Pair Corralation between Element Solutions and Koppers Holdings

Considering the 90-day investment horizon Element Solutions is expected to generate 0.65 times more return on investment than Koppers Holdings. However, Element Solutions is 1.55 times less risky than Koppers Holdings. It trades about -0.13 of its potential returns per unit of risk. Koppers Holdings is currently generating about -0.19 per unit of risk. If you would invest  2,757  in Element Solutions on December 5, 2024 and sell it today you would lose (297.00) from holding Element Solutions or give up 10.77% of portfolio value over 90 days.

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

Element Solutions  vs.  Koppers Holdings

Element Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Koppers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Koppers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Element Solutions and Koppers Holdings

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

The idea behind Element Solutions and Koppers Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.