Correlation Between Albemarle and Sherwin Williams

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

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

Diversification Opportunities for Albemarle and Sherwin Williams

0.77

Correlation Coefficient

Albemarle  Sherwin Williams

Poor diversification

The 3 months correlation between Albemarle and Sherwin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and The Sherwin Williams in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin Williams and Albemarle 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 Albemarle are associated (or correlated) with Sherwin Williams. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherwin Williams has no effect on the direction of Albemarle i.e., Albemarle and Sherwin Williams go up and down completely randomly.

Pair Corralation between Albemarle and Sherwin Williams

Assuming the 90 days horizon Albemarle is expected to generate 2.06 times more return on investment than Sherwin Williams. However, Albemarle is 2.06 times more volatile than The Sherwin Williams. It trades about 0.15 of its potential returns per unit of risk. The Sherwin Williams is currently generating about 0.12 per unit of risk. If you would invest  7,518  in Albemarle on September 5, 2024 and sell it today you would earn a total of  2,952  from holding Albemarle or generate 39.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Albemarle  vs.  The Sherwin Williams

Albemarle

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Albemarle reported solid returns over the last few months and may actually be approaching a breakup point.

Sherwin Williams

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Sherwin Williams are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sherwin Williams reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Albemarle and Sherwin Williams

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

The idea behind Albemarle and The Sherwin Williams 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.