Correlation Between Schroder and Westlake Chemical

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

By analyzing existing cross correlation between Schroder UK Mid and Westlake Chemical Corp, you can compare the effects of market volatilities on Schroder and Westlake 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 Schroder with a short position of Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schroder and Westlake Chemical.

Diversification Opportunities for Schroder and Westlake Chemical

0.26

Correlation Coefficient

Schroder  Westlake Chemical

Modest diversification

The 3 months correlation between Schroder and Westlake is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Schroder UK Mid and Westlake Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical Corp and Schroder 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 Schroder UK Mid are associated (or correlated) with Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical Corp has no effect on the direction of Schroder i.e., Schroder and Westlake Chemical go up and down completely randomly.

Pair Corralation between Schroder and Westlake Chemical

Assuming the 90 days trading horizon Schroder UK Mid is expected to generate 0.5 times more return on investment than Westlake Chemical. However, Schroder UK Mid is 2.0 times less risky than Westlake Chemical. It trades about 0.05 of its potential returns per unit of risk. Westlake Chemical Corp is currently generating about 0.01 per unit of risk. If you would invest  53,167  in Schroder UK Mid on September 12, 2024 and sell it today you would earn a total of  9,233  from holding Schroder UK Mid or generate 17.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.03%
Values	Daily Returns

Schroder UK Mid  vs.  Westlake Chemical Corp

Schroder UK Mid

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schroder UK Mid are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Schroder is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Westlake Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westlake Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Schroder and Westlake Chemical

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

The idea behind Schroder UK Mid and Westlake Chemical Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.