Correlation Between WESTLAKE CHEMICAL and INTERCONT HOTELS

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

By analyzing existing cross correlation between WESTLAKE CHEMICAL and INTERCONT HOTELS, you can compare the effects of market volatilities on WESTLAKE CHEMICAL and INTERCONT HOTELS 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 INTERCONT HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTLAKE CHEMICAL and INTERCONT HOTELS.

Diversification Opportunities for WESTLAKE CHEMICAL and INTERCONT HOTELS

-0.38

Correlation Coefficient

WESTLAKE CHEMICAL  INTERCONT HOTELS

Very good diversification

The 3 months correlation between WESTLAKE and INTERCONT is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding WESTLAKE CHEMICAL and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS 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 INTERCONT HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERCONT HOTELS has no effect on the direction of WESTLAKE CHEMICAL i.e., WESTLAKE CHEMICAL and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between WESTLAKE CHEMICAL and INTERCONT HOTELS

Assuming the 90 days trading horizon WESTLAKE CHEMICAL is expected to under-perform the INTERCONT HOTELS. In addition to that, WESTLAKE CHEMICAL is 1.27 times more volatile than INTERCONT HOTELS. It trades about -0.11 of its total potential returns per unit of risk. INTERCONT HOTELS is currently generating about -0.01 per unit of volatility. If you would invest  11,700  in INTERCONT HOTELS on November 29, 2024 and sell it today you would lose (200.00) from holding INTERCONT HOTELS or give up 1.71% of portfolio value over 90 days.

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

WESTLAKE CHEMICAL  vs.  INTERCONT HOTELS

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

INTERCONT HOTELS

Risk-Adjusted Performance

Weak

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

Pair Trading with WESTLAKE CHEMICAL and INTERCONT HOTELS

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

The idea behind WESTLAKE CHEMICAL and INTERCONT HOTELS 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.

Check out your portfolio center.

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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.