Correlation Between Sherwin Williams and Albemarle

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

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

Diversification Opportunities for Sherwin Williams and Albemarle

0.77

Correlation Coefficient

Sherwin Williams  Albemarle

Poor diversification

The 3 months correlation between Sherwin and Albemarle is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Sherwin Williams and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle and Sherwin Williams 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 The Sherwin Williams 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 Sherwin Williams i.e., Sherwin Williams and Albemarle go up and down completely randomly.

Pair Corralation between Sherwin Williams and Albemarle

Assuming the 90 days horizon Sherwin Williams is expected to generate 3.44 times less return on investment than Albemarle. But when comparing it to its historical volatility, The Sherwin Williams is 2.08 times less risky than Albemarle. It trades about 0.09 of its potential returns per unit of risk. Albemarle is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,034  in Albemarle on September 10, 2024 and sell it today you would earn a total of  2,878  from holding Albemarle or generate 40.92% return on investment over 90 days.

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

The Sherwin Williams  vs.  Albemarle

Sherwin Williams

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Sherwin Williams are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sherwin Williams may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Sherwin Williams and Albemarle

The main advantage of trading using opposite Sherwin Williams and Albemarle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sherwin Williams 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 The Sherwin Williams 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..