Correlation Between Westlake Chemical and Deckers Outdoor

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Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and Deckers Outdoor 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 Westlake Chemical and Deckers Outdoor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical and Deckers Outdoor, you can compare the effects of market volatilities on Westlake Chemical and Deckers Outdoor 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 Westlake Chemical with a short position of Deckers Outdoor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Deckers Outdoor.

Diversification Opportunities for Westlake Chemical and Deckers Outdoor

-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Westlake and Deckers is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor and Westlake Chemical 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 Westlake Chemical are associated (or correlated) with Deckers Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deckers Outdoor has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Deckers Outdoor go up and down completely randomly.

Pair Corralation between Westlake Chemical and Deckers Outdoor

Assuming the 90 days horizon Westlake Chemical is expected to generate 5.33 times less return on investment than Deckers Outdoor. But when comparing it to its historical volatility, Westlake Chemical is 1.48 times less risky than Deckers Outdoor. It trades about 0.03 of its potential returns per unit of risk. Deckers Outdoor is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,167  in Deckers Outdoor on September 18, 2024 and sell it today you would earn a total of  13,283  from holding Deckers Outdoor or generate 215.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Westlake Chemical  vs.  Deckers Outdoor

 Performance 
       Timeline  
Westlake Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Westlake Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Deckers Outdoor 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deckers Outdoor reported solid returns over the last few months and may actually be approaching a breakup point.

Westlake Chemical and Deckers Outdoor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Westlake Chemical and Deckers Outdoor

The main advantage of trading using opposite Westlake Chemical and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, Deckers Outdoor 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 Deckers Outdoor will offset losses from the drop in Deckers Outdoor's long position.
The idea behind Westlake Chemical and Deckers Outdoor 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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