Correlation Between LyondellBasell Industries and Dupont De

Can any of the company-specific risk be diversified away by investing in both LyondellBasell Industries and Dupont De 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 Dupont De 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 Dupont De Nemours, you can compare the effects of market volatilities on LyondellBasell Industries and Dupont De 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 Dupont De. Check out your portfolio center. Please also check ongoing floating volatility patterns of LyondellBasell Industries and Dupont De.

Diversification Opportunities for LyondellBasell Industries and Dupont De

0.25

Correlation Coefficient

LyondellBasell Industries  Dupont De

Modest diversification

The 3 months correlation between LyondellBasell and Dupont is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and Dupont De Nemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont De Nemours 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 Dupont De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont De Nemours has no effect on the direction of LyondellBasell Industries i.e., LyondellBasell Industries and Dupont De go up and down completely randomly.

Pair Corralation between LyondellBasell Industries and Dupont De

Considering the 90-day investment horizon LyondellBasell Industries NV is expected to under-perform the Dupont De. But the stock apears to be less risky and, when comparing its historical volatility, LyondellBasell Industries NV is 1.22 times less risky than Dupont De. The stock trades about -0.23 of its potential returns per unit of risk. The Dupont De Nemours is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8,425  in Dupont De Nemours on August 30, 2024 and sell it today you would lose (35.00) from holding Dupont De Nemours or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

LyondellBasell Industries NV  vs.  Dupont De Nemours

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LyondellBasell Industries and Dupont De

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

The idea behind LyondellBasell Industries NV and Dupont De Nemours 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.