Correlation Between Tempur Sealy and Whirlpool

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

By analyzing existing cross correlation between Tempur Sealy International and Whirlpool, you can compare the effects of market volatilities on Tempur Sealy and Whirlpool 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 Tempur Sealy with a short position of Whirlpool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tempur Sealy and Whirlpool.

Diversification Opportunities for Tempur Sealy and Whirlpool

-0.46

Correlation Coefficient

Tempur Sealy  Whirlpool

Very good diversification

The 3 months correlation between Tempur and Whirlpool is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Tempur Sealy International and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool and Tempur Sealy 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 Tempur Sealy International are associated (or correlated) with Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of Tempur Sealy i.e., Tempur Sealy and Whirlpool go up and down completely randomly.

Pair Corralation between Tempur Sealy and Whirlpool

Assuming the 90 days horizon Tempur Sealy International is expected to generate 1.26 times more return on investment than Whirlpool. However, Tempur Sealy is 1.26 times more volatile than Whirlpool. It trades about 0.01 of its potential returns per unit of risk. Whirlpool is currently generating about -0.12 per unit of risk. If you would invest  6,050  in Tempur Sealy International on December 5, 2024 and sell it today you would earn a total of  0.00  from holding Tempur Sealy International or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tempur Sealy International  vs.  Whirlpool

Tempur Sealy Interna

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tempur Sealy International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tempur Sealy reported solid returns over the last few months and may actually be approaching a breakup point.

Whirlpool

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Tempur Sealy and Whirlpool

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

The idea behind Tempur Sealy International and Whirlpool 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.