Correlation Between Sherwin Williams and LyondellBasell Industries

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

Diversification Opportunities for Sherwin Williams and LyondellBasell Industries

0.84

Correlation Coefficient

Sherwin Williams  LyondellBasell Industries

Very poor diversification

The 3 months correlation between Sherwin and LyondellBasell is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sherwin Williams Co and LyondellBasell Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LyondellBasell Industries 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 LyondellBasell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LyondellBasell Industries has no effect on the direction of Sherwin Williams i.e., Sherwin Williams and LyondellBasell Industries go up and down completely randomly.

Pair Corralation between Sherwin Williams and LyondellBasell Industries

Considering the 90-day investment horizon Sherwin Williams Co is expected to under-perform the LyondellBasell Industries. In addition to that, Sherwin Williams is 1.03 times more volatile than LyondellBasell Industries NV. It trades about -0.12 of its total potential returns per unit of risk. LyondellBasell Industries NV is currently generating about -0.09 per unit of volatility. If you would invest  8,200  in LyondellBasell Industries NV on November 29, 2024 and sell it today you would lose (580.00) from holding LyondellBasell Industries NV or give up 7.07% of portfolio value over 90 days.

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

Sherwin Williams Co  vs.  LyondellBasell Industries NV

Sherwin Williams

Risk-Adjusted Performance

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.

LyondellBasell Industries

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sherwin Williams and LyondellBasell Industries

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

The idea behind Sherwin Williams Co and LyondellBasell Industries NV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.