Correlation Between LyondellBasell Industries and Sherwin Williams

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

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

Diversification Opportunities for LyondellBasell Industries and Sherwin Williams

-0.52

Correlation Coefficient

LyondellBasell Industries  Sherwin Williams

Excellent diversification

The 3 months correlation between LyondellBasell and Sherwin is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and The Sherwin Williams in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin Williams and LyondellBasell Industries 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 LyondellBasell Industries NV 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 LyondellBasell Industries i.e., LyondellBasell Industries and Sherwin Williams go up and down completely randomly.

Pair Corralation between LyondellBasell Industries and Sherwin Williams

Assuming the 90 days horizon LyondellBasell Industries NV is expected to under-perform the Sherwin Williams. But the stock apears to be less risky and, when comparing its historical volatility, LyondellBasell Industries NV is 1.2 times less risky than Sherwin Williams. The stock trades about -0.06 of its potential returns per unit of risk. The The Sherwin Williams is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  32,532  in The Sherwin Williams on September 5, 2024 and sell it today you would earn a total of  5,033  from holding The Sherwin Williams or generate 15.47% return on investment over 90 days.

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

LyondellBasell Industries NV  vs.  The Sherwin Williams

LyondellBasell Industries

Risk-Adjusted Performance

0 of 100

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 fragile 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.

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 LyondellBasell Industries and Sherwin Williams

The main advantage of trading using opposite LyondellBasell Industries and Sherwin Williams positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LyondellBasell Industries 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 LyondellBasell Industries NV 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.