Correlation Between Element Solutions and REX American

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

By analyzing existing cross correlation between Element Solutions and REX American Resources, you can compare the effects of market volatilities on Element Solutions and REX American 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 Element Solutions with a short position of REX American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and REX American.

Diversification Opportunities for Element Solutions and REX American

0.35

Correlation Coefficient

Element Solutions  REX American

Weak diversification

The 3 months correlation between Element and REX is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and REX American Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX American Resources and Element Solutions 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 Element Solutions are associated (or correlated) with REX American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX American Resources has no effect on the direction of Element Solutions i.e., Element Solutions and REX American go up and down completely randomly.

Pair Corralation between Element Solutions and REX American

Considering the 90-day investment horizon Element Solutions is expected to generate 1.41 times less return on investment than REX American. In addition to that, Element Solutions is 1.03 times more volatile than REX American Resources. It trades about 0.19 of its total potential returns per unit of risk. REX American Resources is currently generating about 0.27 per unit of volatility. If you would invest  4,272  in REX American Resources on July 2, 2024 and sell it today you would earn a total of  357.00  from holding REX American Resources or generate 8.36% return on investment over 90 days.

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

Element Solutions  vs.  REX American Resources

Element Solutions

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Element Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Element Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

REX American Resources

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in REX American Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, REX American is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Element Solutions and REX American

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

The idea behind Element Solutions and REX American Resources 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.