Correlation Between PPG Industries and Olin

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

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

Diversification Opportunities for PPG Industries and Olin

0.78

Correlation Coefficient

PPG Industries  Olin

Poor diversification

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

Pair Corralation between PPG Industries and Olin

Considering the 90-day investment horizon PPG Industries is expected to under-perform the Olin. But the stock apears to be less risky and, when comparing its historical volatility, PPG Industries is 1.83 times less risky than Olin. The stock trades about -0.02 of its potential returns per unit of risk. The Olin Corporation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,194  in Olin Corporation on September 1, 2024 and sell it today you would earn a total of  65.00  from holding Olin Corporation or generate 1.55% return on investment over 90 days.

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

PPG Industries  vs.  Olin Corp.

PPG Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Olin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Olin Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Olin is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PPG Industries and Olin

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

The idea behind PPG Industries and Olin Corporation 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.