Correlation Between Sherwin Williams and WD 40

Can any of the company-specific risk be diversified away by investing in both Sherwin Williams and WD 40 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 WD 40 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 WD 40 Company, you can compare the effects of market volatilities on Sherwin Williams and WD 40 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 WD 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sherwin Williams and WD 40.

Diversification Opportunities for Sherwin Williams and WD 40

0.41

Correlation Coefficient

Sherwin Williams  WD 40

Very weak diversification

The 3 months correlation between Sherwin and WD1 is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Sherwin Williams and WD 40 Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 Company 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 WD 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 Company has no effect on the direction of Sherwin Williams i.e., Sherwin Williams and WD 40 go up and down completely randomly.

Pair Corralation between Sherwin Williams and WD 40

Assuming the 90 days horizon The Sherwin Williams is expected to generate 1.01 times more return on investment than WD 40. However, Sherwin Williams is 1.01 times more volatile than WD 40 Company. It trades about -0.05 of its potential returns per unit of risk. WD 40 Company is currently generating about -0.1 per unit of risk. If you would invest  33,035  in The Sherwin Williams on December 19, 2024 and sell it today you would lose (1,750) from holding The Sherwin Williams or give up 5.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

The Sherwin Williams  vs.  WD 40 Company

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

WD 40 Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days WD 40 Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 WD 40

The main advantage of trading using opposite Sherwin Williams and WD 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sherwin Williams position performs unexpectedly, WD 40 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 WD 40 will offset losses from the drop in WD 40's long position.

The idea behind The Sherwin Williams and WD 40 Company 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.