Correlation Between H B and LyondellBasell Industries

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

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

Diversification Opportunities for H B and LyondellBasell Industries

0.44

Correlation Coefficient

H B  LyondellBasell Industries

Very weak diversification

The 3 months correlation between FUL and LyondellBasell is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding H B Fuller and LyondellBasell Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LyondellBasell Industries and H B 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 H B Fuller are associated (or correlated) with LyondellBasell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LyondellBasell Industries has no effect on the direction of H B i.e., H B and LyondellBasell Industries go up and down completely randomly.

Pair Corralation between H B and LyondellBasell Industries

Considering the 90-day investment horizon H B Fuller is expected to under-perform the LyondellBasell Industries. In addition to that, H B is 1.26 times more volatile than LyondellBasell Industries NV. It trades about -0.31 of its total potential returns per unit of risk. LyondellBasell Industries NV is currently generating about -0.09 per unit of volatility. If you would invest  8,200  in LyondellBasell Industries NV on November 29, 2024 and sell it today you would lose (580.00) from holding LyondellBasell Industries NV or give up 7.07% of portfolio value over 90 days.

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

H B Fuller  vs.  LyondellBasell Industries NV

H B Fuller

Risk-Adjusted Performance

Very Weak

Over the last 90 days H B Fuller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

LyondellBasell Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days LyondellBasell Industries NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators 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 H B and LyondellBasell Industries

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

The idea behind H B Fuller and LyondellBasell Industries NV 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.