Correlation Between PPG Industries and Albemarle

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

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

Diversification Opportunities for PPG Industries and Albemarle

0.3

Correlation Coefficient

PPG Industries  Albemarle

Weak diversification

The 3 months correlation between PPG and Albemarle is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding PPG Industries and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle and PPG 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 PPG Industries are associated (or correlated) with Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of PPG Industries i.e., PPG Industries and Albemarle go up and down completely randomly.

Pair Corralation between PPG Industries and Albemarle

Assuming the 90 days horizon PPG Industries is expected to under-perform the Albemarle. But the stock apears to be less risky and, when comparing its historical volatility, PPG Industries is 3.05 times less risky than Albemarle. The stock trades about -0.01 of its potential returns per unit of risk. The Albemarle is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8,806  in Albemarle on September 23, 2024 and sell it today you would lose (224.00) from holding Albemarle or give up 2.54% of portfolio value over 90 days.

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

PPG Industries  vs.  Albemarle

PPG Industries

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PPG Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Albemarle

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Albemarle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PPG Industries and Albemarle

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

The idea behind PPG Industries and Albemarle 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.