Correlation Between Blue Apron and Westlake Chemical

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

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

Diversification Opportunities for Blue Apron and Westlake Chemical

0.8

Correlation Coefficient

Blue Apron  Westlake Chemical

Very poor diversification

The 3 months correlation between Blue and Westlake is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Blue Apron Holdings and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical and Blue Apron 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 Blue Apron Holdings 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 has no effect on the direction of Blue Apron i.e., Blue Apron and Westlake Chemical go up and down completely randomly.

Pair Corralation between Blue Apron and Westlake Chemical

Given the investment horizon of 90 days Blue Apron Holdings is expected to generate 5.2 times more return on investment than Westlake Chemical. However, Blue Apron is 5.2 times more volatile than Westlake Chemical. It trades about 0.01 of its potential returns per unit of risk. Westlake Chemical is currently generating about 0.02 per unit of risk. If you would invest  4,824  in Blue Apron Holdings on January 24, 2024 and sell it today you would lose (3,525) from holding Blue Apron Holdings or give up 73.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	77.98%
Values	Daily Returns

Blue Apron Holdings  vs.  Westlake Chemical

Blue Apron Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Apron Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Blue Apron is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Westlake Chemical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westlake Chemical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Westlake Chemical may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Blue Apron and Westlake Chemical

The main advantage of trading using opposite Blue Apron and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Apron 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 Blue Apron Holdings and Westlake Chemical 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.