Correlation Between Sherwin Williams and PPG Industries

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

Diversification Opportunities for Sherwin Williams and PPG Industries

0.08

Correlation Coefficient

Sherwin Williams  PPG Industries

Significant diversification

The 3 months correlation between Sherwin and PPG is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sherwin Williams Co and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Sherwin Williams i.e., Sherwin Williams and PPG Industries go up and down completely randomly.

Pair Corralation between Sherwin Williams and PPG Industries

Considering the 90-day investment horizon Sherwin Williams Co is expected to generate 1.25 times more return on investment than PPG Industries. However, Sherwin Williams is 1.25 times more volatile than PPG Industries. It trades about 0.16 of its potential returns per unit of risk. PPG Industries is currently generating about -0.03 per unit of risk. If you would invest  30,087  in Sherwin Williams Co on September 1, 2024 and sell it today you would earn a total of  9,653  from holding Sherwin Williams Co or generate 32.08% return on investment over 90 days.

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

Sherwin Williams Co  vs.  PPG Industries

Sherwin Williams

Risk-Adjusted Performance

8 of 100

OK

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 unfluctuating technical indicators, Sherwin Williams may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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.

Pair Trading with Sherwin Williams and PPG Industries

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

The idea behind Sherwin Williams Co and PPG Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.