Correlation Between Lanxess AG and Chemours

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

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

Diversification Opportunities for Lanxess AG and Chemours

0.21

Correlation Coefficient

Lanxess AG  Chemours

Modest diversification

The 3 months correlation between Lanxess and Chemours is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lanxess AG and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours and Lanxess AG 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 Lanxess AG 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 Lanxess AG i.e., Lanxess AG and Chemours go up and down completely randomly.

Pair Corralation between Lanxess AG and Chemours

Assuming the 90 days horizon Lanxess AG is expected to generate 0.63 times more return on investment than Chemours. However, Lanxess AG is 1.59 times less risky than Chemours. It trades about -0.02 of its potential returns per unit of risk. Chemours Co is currently generating about -0.03 per unit of risk. If you would invest  2,799  in Lanxess AG on October 3, 2024 and sell it today you would lose (356.00) from holding Lanxess AG or give up 12.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.78%
Values	Daily Returns

Lanxess AG  vs.  Chemours Co

Lanxess AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lanxess AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Lanxess AG and Chemours

The main advantage of trading using opposite Lanxess AG and Chemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lanxess AG 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 Lanxess AG and Chemours Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.