Correlation Between WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR

Can any of the company-specific risk be diversified away by investing in both WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR 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 H+M HEN+MAUUNSPADR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WESTLAKE CHEMICAL and HM HENMAUUNSPADR 15, you can compare the effects of market volatilities on WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR 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 H+M HEN+MAUUNSPADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR.

Diversification Opportunities for WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR

0.66

Correlation Coefficient

WESTLAKE CHEMICAL  H+M HEN+MAUUNSPADR

Poor diversification

The 3 months correlation between WESTLAKE and H+M is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding WESTLAKE CHEMICAL and HM HENMAUUNSPADR 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H+M HEN+MAUUNSPADR 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 H+M HEN+MAUUNSPADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H+M HEN+MAUUNSPADR has no effect on the direction of WESTLAKE CHEMICAL i.e., WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR go up and down completely randomly.

Pair Corralation between WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR

Assuming the 90 days trading horizon WESTLAKE CHEMICAL is expected to under-perform the H+M HEN+MAUUNSPADR. In addition to that, WESTLAKE CHEMICAL is 1.15 times more volatile than HM HENMAUUNSPADR 15. It trades about -0.09 of its total potential returns per unit of risk. HM HENMAUUNSPADR 15 is currently generating about -0.04 per unit of volatility. If you would invest  256.00  in HM HENMAUUNSPADR 15 on December 30, 2024 and sell it today you would lose (14.00) from holding HM HENMAUUNSPADR 15 or give up 5.47% of portfolio value over 90 days.

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

WESTLAKE CHEMICAL  vs.  HM HENMAUUNSPADR 15

WESTLAKE CHEMICAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days WESTLAKE CHEMICAL 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.

H+M HEN+MAUUNSPADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days HM HENMAUUNSPADR 15 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H+M HEN+MAUUNSPADR is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR

The main advantage of trading using opposite WESTLAKE CHEMICAL and H+M HEN+MAUUNSPADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WESTLAKE CHEMICAL position performs unexpectedly, H+M HEN+MAUUNSPADR 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 H+M HEN+MAUUNSPADR will offset losses from the drop in H+M HEN+MAUUNSPADR's long position.

The idea behind WESTLAKE CHEMICAL and HM HENMAUUNSPADR 15 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.