Correlation Between Westlake Chemical and Sherwin Williams

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

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

Diversification Opportunities for Westlake Chemical and Sherwin Williams

0.37

Correlation Coefficient

Westlake Chemical  Sherwin Williams

Weak diversification

The 3 months correlation between Westlake and Sherwin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and Sherwin Williams Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin Williams 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 Sherwin Williams. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherwin Williams has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Sherwin Williams go up and down completely randomly.

Pair Corralation between Westlake Chemical and Sherwin Williams

Considering the 90-day investment horizon Westlake Chemical is expected to generate 1.41 times more return on investment than Sherwin Williams. However, Westlake Chemical is 1.41 times more volatile than Sherwin Williams Co. It trades about 0.14 of its potential returns per unit of risk. Sherwin Williams Co is currently generating about 0.17 per unit of risk. If you would invest  11,362  in Westlake Chemical on January 25, 2024 and sell it today you would earn a total of  3,628  from holding Westlake Chemical or generate 31.93% return on investment over 90 days.

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

Westlake Chemical  vs.  Sherwin Williams Co

Westlake Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westlake Chemical are ranked lower than 6 (%) 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.

Sherwin Williams

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sherwin Williams Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical indicators, Sherwin Williams is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Westlake Chemical and Sherwin Williams

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

The idea behind Westlake Chemical and Sherwin Williams Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.