Correlation Between Westlake Chemical and Green Plains

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

By analyzing existing cross correlation between Westlake Chemical Partners and Green Plains Renewable, you can compare the effects of market volatilities on Westlake Chemical and Green Plains 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 Green Plains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Green Plains.

Diversification Opportunities for Westlake Chemical and Green Plains

-0.54

Correlation Coefficient

Westlake Chemical  Green Plains

Excellent diversification

The 3 months correlation between Westlake and Green is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Partners and Green Plains Renewable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Plains Renewable 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 Partners are associated (or correlated) with Green Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Plains Renewable has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Green Plains go up and down completely randomly.

Pair Corralation between Westlake Chemical and Green Plains

Given the investment horizon of 90 days Westlake Chemical Partners is expected to generate 0.15 times more return on investment than Green Plains. However, Westlake Chemical Partners is 6.88 times less risky than Green Plains. It trades about 0.18 of its potential returns per unit of risk. Green Plains Renewable is currently generating about -0.06 per unit of risk. If you would invest  2,226  in Westlake Chemical Partners on August 31, 2024 and sell it today you would earn a total of  146.00  from holding Westlake Chemical Partners or generate 6.56% 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 Partners  vs.  Green Plains Renewable

Westlake Chemical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westlake Chemical Partners are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Westlake Chemical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Green Plains Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Plains Renewable has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Westlake Chemical and Green Plains

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

The idea behind Westlake Chemical Partners and Green Plains Renewable 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.