Correlation Between Sherwin Williams and Quaker Chemical

Can any of the company-specific risk be diversified away by investing in both Sherwin Williams and Quaker Chemical 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 Quaker Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Sherwin Williams and Quaker Chemical, you can compare the effects of market volatilities on Sherwin Williams and Quaker Chemical 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 Quaker Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sherwin Williams and Quaker Chemical.

Diversification Opportunities for Sherwin Williams and Quaker Chemical

0.73

Correlation Coefficient

Sherwin Williams  Quaker Chemical

Poor diversification

The 3 months correlation between Sherwin and Quaker is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Sherwin Williams and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 The Sherwin Williams are associated (or correlated) with Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Sherwin Williams i.e., Sherwin Williams and Quaker Chemical go up and down completely randomly.

Pair Corralation between Sherwin Williams and Quaker Chemical

Assuming the 90 days horizon The Sherwin Williams is expected to generate 0.81 times more return on investment than Quaker Chemical. However, The Sherwin Williams is 1.24 times less risky than Quaker Chemical. It trades about -0.02 of its potential returns per unit of risk. Quaker Chemical is currently generating about -0.08 per unit of risk. If you would invest  32,956  in The Sherwin Williams on December 29, 2024 and sell it today you would lose (1,021) from holding The Sherwin Williams or give up 3.1% of portfolio value over 90 days.

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

The Sherwin Williams  vs.  Quaker Chemical

Sherwin Williams

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Sherwin Williams has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sherwin Williams is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Quaker Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sherwin Williams and Quaker Chemical

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

The idea behind The Sherwin Williams and Quaker Chemical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.