Correlation Between RPM International and Albemarle Corp

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

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

Diversification Opportunities for RPM International and Albemarle Corp

0.82

Correlation Coefficient

RPM International  Albemarle Corp

Very poor diversification

The 3 months correlation between RPM and Albemarle is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding RPM International and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp and RPM International 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 RPM International are associated (or correlated) with Albemarle Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle Corp has no effect on the direction of RPM International i.e., RPM International and Albemarle Corp go up and down completely randomly.

Pair Corralation between RPM International and Albemarle Corp

Considering the 90-day investment horizon RPM International is expected to generate 0.34 times more return on investment than Albemarle Corp. However, RPM International is 2.98 times less risky than Albemarle Corp. It trades about -0.45 of its potential returns per unit of risk. Albemarle Corp is currently generating about -0.3 per unit of risk. If you would invest  13,787  in RPM International on September 23, 2024 and sell it today you would lose (1,258) from holding RPM International or give up 9.12% of portfolio value over 90 days.

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

RPM International  vs.  Albemarle Corp

RPM International

Risk-Adjusted Performance

1 of 100

Weak

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

Albemarle Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Albemarle Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RPM International and Albemarle Corp

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

The idea behind RPM International and Albemarle 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .