Correlation Between Element Solutions and Quaker Chemical

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

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

Diversification Opportunities for Element Solutions and Quaker Chemical

0.11

Correlation Coefficient

Element Solutions  Quaker Chemical

Average diversification

The 3 months correlation between Element and Quaker is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Element Solutions i.e., Element Solutions and Quaker Chemical go up and down completely randomly.

Pair Corralation between Element Solutions and Quaker Chemical

Considering the 90-day investment horizon Element Solutions is expected to under-perform the Quaker Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Element Solutions is 1.19 times less risky than Quaker Chemical. The stock trades about -0.09 of its potential returns per unit of risk. The Quaker Chemical is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  13,959  in Quaker Chemical on December 28, 2024 and sell it today you would lose (1,409) from holding Quaker Chemical or give up 10.09% of portfolio value over 90 days.

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

Element Solutions  vs.  Quaker Chemical

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.

Quaker Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Element Solutions and Quaker Chemical

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

The idea behind Element Solutions and Quaker Chemical 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.