Correlation Between LyondellBasell Industries and Avient Corp

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

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

Diversification Opportunities for LyondellBasell Industries and Avient Corp

-0.39

Correlation Coefficient

LyondellBasell Industries  Avient Corp

Very good diversification

The 3 months correlation between LyondellBasell and Avient is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp and LyondellBasell 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 LyondellBasell Industries NV are associated (or correlated) with Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of LyondellBasell Industries i.e., LyondellBasell Industries and Avient Corp go up and down completely randomly.

Pair Corralation between LyondellBasell Industries and Avient Corp

Considering the 90-day investment horizon LyondellBasell Industries NV is expected to under-perform the Avient Corp. But the stock apears to be less risky and, when comparing its historical volatility, LyondellBasell Industries NV is 1.59 times less risky than Avient Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Avient Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,881  in Avient Corp on September 15, 2024 and sell it today you would earn a total of  924.00  from holding Avient Corp or generate 23.81% return on investment over 90 days.

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

LyondellBasell Industries NV  vs.  Avient Corp

LyondellBasell Industries

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Avient Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avient Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Avient Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LyondellBasell Industries and Avient Corp

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

The idea behind LyondellBasell Industries NV and Avient Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.