Correlation Between Trellus Health and Westlake Chemical

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

By analyzing existing cross correlation between Trellus Health plc and Westlake Chemical Corp, you can compare the effects of market volatilities on Trellus Health and Westlake 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 Trellus Health with a short position of Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trellus Health and Westlake Chemical.

Diversification Opportunities for Trellus Health and Westlake Chemical

0.27

Correlation Coefficient

Trellus Health  Westlake Chemical

Modest diversification

The 3 months correlation between Trellus and Westlake is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Trellus Health plc and Westlake Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical Corp and Trellus Health 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 Trellus Health plc are associated (or correlated) with Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical Corp has no effect on the direction of Trellus Health i.e., Trellus Health and Westlake Chemical go up and down completely randomly.

Pair Corralation between Trellus Health and Westlake Chemical

Assuming the 90 days trading horizon Trellus Health plc is expected to generate 50.21 times more return on investment than Westlake Chemical. However, Trellus Health is 50.21 times more volatile than Westlake Chemical Corp. It trades about 0.12 of its potential returns per unit of risk. Westlake Chemical Corp is currently generating about -0.1 per unit of risk. If you would invest  55.00  in Trellus Health plc on December 29, 2024 and sell it today you would earn a total of  150.00  from holding Trellus Health plc or generate 272.73% return on investment over 90 days.

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

Trellus Health plc  vs.  Westlake Chemical Corp

Trellus Health plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trellus Health plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Trellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Westlake Chemical Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westlake Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Trellus Health and Westlake Chemical

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

The idea behind Trellus Health plc and Westlake Chemical Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.