Correlation Between Sherwin Williams and Lanxess AG

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

Diversification Opportunities for Sherwin Williams and Lanxess AG

0.7

Correlation Coefficient

Sherwin Williams  Lanxess AG

Poor diversification

The 3 months correlation between Sherwin and Lanxess is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sherwin Williams Co and Lanxess AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanxess AG 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 Lanxess AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanxess AG has no effect on the direction of Sherwin Williams i.e., Sherwin Williams and Lanxess AG go up and down completely randomly.

Pair Corralation between Sherwin Williams and Lanxess AG

Considering the 90-day investment horizon Sherwin Williams Co is expected to generate 0.9 times more return on investment than Lanxess AG. However, Sherwin Williams Co is 1.11 times less risky than Lanxess AG. It trades about -0.07 of its potential returns per unit of risk. Lanxess AG is currently generating about -0.23 per unit of risk. If you would invest  38,105  in Sherwin Williams Co on October 21, 2024 and sell it today you would lose (2,707) from holding Sherwin Williams Co or give up 7.1% of portfolio value over 90 days.

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

Sherwin Williams Co  vs.  Lanxess AG

Sherwin Williams

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sherwin Williams Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Lanxess AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lanxess AG 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 nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sherwin Williams and Lanxess AG

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

The idea behind Sherwin Williams Co and Lanxess AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.