Correlation Between Westlake Chemical and Air Products

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

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

Diversification Opportunities for Westlake Chemical and Air Products

-0.56

Correlation Coefficient

Westlake Chemical  Air Products

Excellent diversification

The 3 months correlation between Westlake and Air is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Westlake Chemical 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 Westlake Chemical are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Air Products go up and down completely randomly.

Pair Corralation between Westlake Chemical and Air Products

Considering the 90-day investment horizon Westlake Chemical is expected to under-perform the Air Products. But the stock apears to be less risky and, when comparing its historical volatility, Westlake Chemical is 1.14 times less risky than Air Products. The stock trades about -0.12 of its potential returns per unit of risk. The Air Products and is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  27,836  in Air Products and on September 12, 2024 and sell it today you would earn a total of  3,685  from holding Air Products and or generate 13.24% return on investment over 90 days.

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

Westlake Chemical  vs.  Air Products and

Westlake Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westlake Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Air Products

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westlake Chemical and Air Products

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

The idea behind Westlake Chemical and Air Products and 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.