Correlation Between Lsb Industries and Huntsman

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

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

Diversification Opportunities for Lsb Industries and Huntsman

0.16

Correlation Coefficient

Lsb Industries  Huntsman

Average diversification

The 3 months correlation between Lsb and Huntsman is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lsb Industries and Huntsman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman and Lsb Industries 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 Lsb Industries are associated (or correlated) with Huntsman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman has no effect on the direction of Lsb Industries i.e., Lsb Industries and Huntsman go up and down completely randomly.

Pair Corralation between Lsb Industries and Huntsman

Considering the 90-day investment horizon Lsb Industries is expected to under-perform the Huntsman. In addition to that, Lsb Industries is 1.48 times more volatile than Huntsman. It trades about -0.03 of its total potential returns per unit of risk. Huntsman is currently generating about -0.03 per unit of volatility. If you would invest  1,731  in Huntsman on December 28, 2024 and sell it today you would lose (111.00) from holding Huntsman or give up 6.41% of portfolio value over 90 days.

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

Lsb Industries  vs.  Huntsman

Lsb Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lsb Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lsb Industries is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Huntsman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huntsman has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Huntsman is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lsb Industries and Huntsman

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

The idea behind Lsb Industries and Huntsman 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.