Correlation Between Lear and Chemours

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

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

Diversification Opportunities for Lear and Chemours

-0.78

Correlation Coefficient

Lear  Chemours

Pay attention - limited upside

The 3 months correlation between Lear and Chemours is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and The Chemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours and Lear 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 Lear Corporation are associated (or correlated) with Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Lear i.e., Lear and Chemours go up and down completely randomly.

Pair Corralation between Lear and Chemours

Assuming the 90 days trading horizon Lear Corporation is expected to under-perform the Chemours. But the stock apears to be less risky and, when comparing its historical volatility, Lear Corporation is 2.51 times less risky than Chemours. The stock trades about -0.04 of its potential returns per unit of risk. The The Chemours is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  56,648  in The Chemours on October 11, 2024 and sell it today you would lose (15,758) from holding The Chemours or give up 27.82% of portfolio value over 90 days.

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

Lear Corp.  vs.  The Chemours

Lear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lear Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chemours

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Chemours are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Chemours may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lear and Chemours

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

The idea behind Lear Corporation and The Chemours 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.