Correlation Between Universal and WESTLAKE

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

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

Diversification Opportunities for Universal and WESTLAKE

-0.02

Correlation Coefficient

Universal  WESTLAKE

Good diversification

The 3 months correlation between Universal and WESTLAKE is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Universal and WESTLAKE CHEM P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLAKE CHEM P and Universal 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 Universal are associated (or correlated) with WESTLAKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTLAKE CHEM P has no effect on the direction of Universal i.e., Universal and WESTLAKE go up and down completely randomly.

Pair Corralation between Universal and WESTLAKE

Considering the 90-day investment horizon Universal is expected to under-perform the WESTLAKE. In addition to that, Universal is 2.27 times more volatile than WESTLAKE CHEM P. It trades about -0.05 of its total potential returns per unit of risk. WESTLAKE CHEM P is currently generating about -0.09 per unit of volatility. If you would invest  9,772  in WESTLAKE CHEM P on December 2, 2024 and sell it today you would lose (328.00) from holding WESTLAKE CHEM P or give up 3.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Universal  vs.  WESTLAKE CHEM P

Universal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WESTLAKE CHEM P

Risk-Adjusted Performance

Very Weak

Over the last 90 days WESTLAKE CHEM P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WESTLAKE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Universal and WESTLAKE

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

The idea behind Universal and WESTLAKE CHEM P 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.