Correlation Between WD 40 and Quaker Chemical

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

By analyzing existing cross correlation between WD 40 Company and Quaker Chemical, you can compare the effects of market volatilities on WD 40 and Quaker Chemical 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 Quaker Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and Quaker Chemical.

Diversification Opportunities for WD 40 and Quaker Chemical

-0.03

Correlation Coefficient

WD 40  Quaker Chemical

Good diversification

The 3 months correlation between WDFC and Quaker is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 Company and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Company are associated (or correlated) with Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of WD 40 i.e., WD 40 and Quaker Chemical go up and down completely randomly.

Pair Corralation between WD 40 and Quaker Chemical

Given the investment horizon of 90 days WD 40 Company is expected to generate 0.79 times more return on investment than Quaker Chemical. However, WD 40 Company is 1.26 times less risky than Quaker Chemical. It trades about 0.01 of its potential returns per unit of risk. Quaker Chemical is currently generating about -0.05 per unit of risk. If you would invest  24,108  in WD 40 Company on December 28, 2024 and sell it today you would earn a total of  141.00  from holding WD 40 Company or generate 0.58% return on investment over 90 days.

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

WD 40 Company  vs.  Quaker Chemical

WD 40 Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WD 40 Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, WD 40 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Quaker Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with WD 40 and Quaker Chemical

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

The idea behind WD 40 Company and Quaker Chemical 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.