Correlation Between Western Investment and Chemtrade Logistics

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

By analyzing existing cross correlation between Western Investment and Chemtrade Logistics Income, you can compare the effects of market volatilities on Western Investment and Chemtrade Logistics 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 Western Investment with a short position of Chemtrade Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Investment and Chemtrade Logistics.

Diversification Opportunities for Western Investment and Chemtrade Logistics

-0.15

Correlation Coefficient

Western Investment  Chemtrade Logistics

Good diversification

The 3 months correlation between Western and Chemtrade is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics and Western Investment 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 Western Investment are associated (or correlated) with Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Western Investment i.e., Western Investment and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Western Investment and Chemtrade Logistics

Given the investment horizon of 90 days Western Investment is expected to generate 2.61 times more return on investment than Chemtrade Logistics. However, Western Investment is 2.61 times more volatile than Chemtrade Logistics Income. It trades about 0.05 of its potential returns per unit of risk. Chemtrade Logistics Income is currently generating about 0.04 per unit of risk. If you would invest  37.00  in Western Investment on October 4, 2024 and sell it today you would earn a total of  26.00  from holding Western Investment or generate 70.27% return on investment over 90 days.

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

Western Investment  vs.  Chemtrade Logistics Income

Western Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Western Investment and Chemtrade Logistics

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

The idea behind Western Investment and Chemtrade Logistics Income 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.