Correlation Between WD 40 and Loews Corp

Can any of the company-specific risk be diversified away by investing in both WD 40 and Loews Corp 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 WD 40 and Loews Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WD 40 CO and Loews Corp, you can compare the effects of market volatilities on WD 40 and Loews Corp 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 WD 40 with a short position of Loews Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and Loews Corp.

Diversification Opportunities for WD 40 and Loews Corp

0.8

Correlation Coefficient

WD 40  Loews Corp

Very poor diversification

The 3 months correlation between WD1 and Loews is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 CO and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp and WD 40 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 WD 40 CO are associated (or correlated) with Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of WD 40 i.e., WD 40 and Loews Corp go up and down completely randomly.

Pair Corralation between WD 40 and Loews Corp

Assuming the 90 days trading horizon WD 40 CO is expected to under-perform the Loews Corp. But the stock apears to be less risky and, when comparing its historical volatility, WD 40 CO is 1.12 times less risky than Loews Corp. The stock trades about -0.56 of its potential returns per unit of risk. The Loews Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,150  in Loews Corp on October 5, 2024 and sell it today you would earn a total of  150.00  from holding Loews Corp or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

WD 40 CO  vs.  Loews Corp

WD 40 CO

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WD 40 CO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WD 40 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Loews Corp

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Loews Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Loews Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WD 40 and Loews Corp

The main advantage of trading using opposite WD 40 and Loews Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD 40 position performs unexpectedly, Loews Corp 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 Loews Corp will offset losses from the drop in Loews Corp's long position.

The idea behind WD 40 CO and Loews Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.