Correlation Between BANNER and Quaker Chemical

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

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

Diversification Opportunities for BANNER and Quaker Chemical

0.47

Correlation Coefficient

BANNER  Quaker Chemical

Very weak diversification

The 3 months correlation between BANNER and Quaker is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding BANNER and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical and BANNER 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 BANNER 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 BANNER i.e., BANNER and Quaker Chemical go up and down completely randomly.

Pair Corralation between BANNER and Quaker Chemical

Assuming the 90 days trading horizon BANNER is expected to generate 1.37 times more return on investment than Quaker Chemical. However, BANNER is 1.37 times more volatile than Quaker Chemical. It trades about -0.27 of its potential returns per unit of risk. Quaker Chemical is currently generating about -0.56 per unit of risk. If you would invest  6,950  in BANNER on October 11, 2024 and sell it today you would lose (550.00) from holding BANNER or give up 7.91% of portfolio value over 90 days.

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

BANNER  vs.  Quaker Chemical

BANNER

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANNER are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, BANNER exhibited solid returns over the last few months and may actually be approaching a breakup point.

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BANNER and Quaker Chemical

The main advantage of trading using opposite BANNER and Quaker Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANNER 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 BANNER 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.