Correlation Between Trinseo SA and RPM International

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

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

Diversification Opportunities for Trinseo SA and RPM International

0.22

Correlation Coefficient

Trinseo SA  RPM International

Modest diversification

The 3 months correlation between Trinseo and RPM is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Trinseo SA and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International and Trinseo SA 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 Trinseo SA are associated (or correlated) with RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of Trinseo SA i.e., Trinseo SA and RPM International go up and down completely randomly.

Pair Corralation between Trinseo SA and RPM International

Considering the 90-day investment horizon Trinseo SA is expected to under-perform the RPM International. In addition to that, Trinseo SA is 3.55 times more volatile than RPM International. It trades about -0.06 of its total potential returns per unit of risk. RPM International is currently generating about -0.08 per unit of volatility. If you would invest  12,491  in RPM International on December 26, 2024 and sell it today you would lose (882.00) from holding RPM International or give up 7.06% of portfolio value over 90 days.

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

Trinseo SA  vs.  RPM International

Trinseo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trinseo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

RPM International

Risk-Adjusted Performance

Very Weak

Over the last 90 days RPM International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Trinseo SA and RPM International

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

The idea behind Trinseo SA and RPM International 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.