Correlation Between Sherwin Williams and Albemarle Corp

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Can any of the company-specific risk be diversified away by investing in both Sherwin Williams 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 Sherwin Williams and Albemarle Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sherwin Williams Co and Albemarle Corp, you can compare the effects of market volatilities on Sherwin Williams 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 Sherwin Williams with a short position of Albemarle Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sherwin Williams and Albemarle Corp.

Diversification Opportunities for Sherwin Williams and Albemarle Corp

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sherwin and Albemarle is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sherwin Williams Co and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp and Sherwin Williams 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 Sherwin Williams Co 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 Sherwin Williams i.e., Sherwin Williams and Albemarle Corp go up and down completely randomly.

Pair Corralation between Sherwin Williams and Albemarle Corp

Considering the 90-day investment horizon Sherwin Williams is expected to generate 1.52 times less return on investment than Albemarle Corp. But when comparing it to its historical volatility, Sherwin Williams Co is 2.25 times less risky than Albemarle Corp. It trades about 0.26 of its potential returns per unit of risk. Albemarle Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,552  in Albemarle Corp on August 31, 2024 and sell it today you would earn a total of  1,246  from holding Albemarle Corp or generate 13.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sherwin Williams Co  vs.  Albemarle Corp

 Performance 
       Timeline  
Sherwin Williams 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Sherwin Williams Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Sherwin Williams may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Albemarle Corp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Albemarle Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Sherwin Williams and Albemarle Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sherwin Williams and Albemarle Corp

The main advantage of trading using opposite Sherwin Williams and Albemarle Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sherwin Williams 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 Sherwin Williams Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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