Correlation Between Element Solutions and Trinseo SA

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

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

Diversification Opportunities for Element Solutions and Trinseo SA

-0.35

Correlation Coefficient

Element Solutions  Trinseo SA

Very good diversification

The 3 months correlation between Element and Trinseo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and Trinseo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinseo SA 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 Trinseo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinseo SA has no effect on the direction of Element Solutions i.e., Element Solutions and Trinseo SA go up and down completely randomly.

Pair Corralation between Element Solutions and Trinseo SA

Considering the 90-day investment horizon Element Solutions is expected to generate 1.42 times less return on investment than Trinseo SA. But when comparing it to its historical volatility, Element Solutions is 3.84 times less risky than Trinseo SA. It trades about 0.1 of its potential returns per unit of risk. Trinseo SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  428.00  in Trinseo SA on September 2, 2024 and sell it today you would earn a total of  5.00  from holding Trinseo SA or generate 1.17% return on investment over 90 days.

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

Element Solutions  vs.  Trinseo SA

Element Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Element Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Element Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Trinseo SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trinseo SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Trinseo SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Element Solutions and Trinseo SA

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

The idea behind Element Solutions and Trinseo SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..