Correlation Between WT OFFSHORE and LyondellBasell Industries

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

By analyzing existing cross correlation between WT OFFSHORE and LyondellBasell Industries NV, you can compare the effects of market volatilities on WT OFFSHORE and LyondellBasell Industries 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 WT OFFSHORE with a short position of LyondellBasell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of WT OFFSHORE and LyondellBasell Industries.

Diversification Opportunities for WT OFFSHORE and LyondellBasell Industries

0.57

Correlation Coefficient

WT OFFSHORE  LyondellBasell Industries

Very weak diversification

The 3 months correlation between UWV and LyondellBasell is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding WT OFFSHORE and LyondellBasell Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LyondellBasell Industries and WT OFFSHORE 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 WT OFFSHORE are associated (or correlated) with LyondellBasell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LyondellBasell Industries has no effect on the direction of WT OFFSHORE i.e., WT OFFSHORE and LyondellBasell Industries go up and down completely randomly.

Pair Corralation between WT OFFSHORE and LyondellBasell Industries

Assuming the 90 days trading horizon WT OFFSHORE is expected to generate 1.96 times more return on investment than LyondellBasell Industries. However, WT OFFSHORE is 1.96 times more volatile than LyondellBasell Industries NV. It trades about -0.01 of its potential returns per unit of risk. LyondellBasell Industries NV is currently generating about -0.07 per unit of risk. If you would invest  154.00  in WT OFFSHORE on December 30, 2024 and sell it today you would lose (9.00) from holding WT OFFSHORE or give up 5.84% of portfolio value over 90 days.

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

WT OFFSHORE  vs.  LyondellBasell Industries NV

WT OFFSHORE

Risk-Adjusted Performance

Very Weak

Over the last 90 days WT OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WT OFFSHORE is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

LyondellBasell Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days LyondellBasell Industries NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with WT OFFSHORE and LyondellBasell Industries

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

The idea behind WT OFFSHORE and LyondellBasell Industries NV 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 Stocks Directory module to find actively traded stocks across global markets.