Correlation Between RPM International and Sherwin Williams

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

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

Diversification Opportunities for RPM International and Sherwin Williams

0.58

Correlation Coefficient

RPM International  Sherwin Williams

Very weak diversification

The 3 months correlation between RPM and Sherwin is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding RPM International and Sherwin Williams Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin Williams and RPM International 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 RPM International 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 RPM International i.e., RPM International and Sherwin Williams go up and down completely randomly.

Pair Corralation between RPM International and Sherwin Williams

Considering the 90-day investment horizon RPM International is expected to generate 1.42 times less return on investment than Sherwin Williams. But when comparing it to its historical volatility, RPM International is 1.19 times less risky than Sherwin Williams. It trades about 0.16 of its potential returns per unit of risk. Sherwin Williams Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  36,071  in Sherwin Williams Co on August 23, 2024 and sell it today you would earn a total of  2,261  from holding Sherwin Williams Co or generate 6.27% return on investment over 90 days.

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

RPM International  vs.  Sherwin Williams Co

RPM International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RPM International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, RPM International displayed solid returns over the last few months and may actually be approaching a breakup point.

Sherwin Williams

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sherwin Williams Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Sherwin Williams may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with RPM International and Sherwin Williams

The main advantage of trading using opposite RPM International and Sherwin Williams positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPM International 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 RPM International 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.