Correlation Between Air Products and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Air Products and Fortune Brands 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 Air Products and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Fortune Brands Home, you can compare the effects of market volatilities on Air Products and Fortune Brands 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 Air Products with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Fortune Brands.
Diversification Opportunities for Air Products and Fortune Brands
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and Fortune is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home and Air Products 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 Air Products Chemicals are associated (or correlated) with Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of Air Products i.e., Air Products and Fortune Brands go up and down completely randomly.
Pair Corralation between Air Products and Fortune Brands
Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 0.6 times more return on investment than Fortune Brands. However, Air Products Chemicals is 1.67 times less risky than Fortune Brands. It trades about 0.01 of its potential returns per unit of risk. Fortune Brands Home is currently generating about -0.04 per unit of risk. If you would invest 31,166 in Air Products Chemicals on September 12, 2024 and sell it today you would earn a total of 52.00 from holding Air Products Chemicals or generate 0.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Air Products Chemicals vs. Fortune Brands Home
Performance |
| Timeline |
| Air Products Chemicals |
| Fortune Brands Home |
Air Products and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Fortune Brands
The main advantage of trading using opposite Air Products and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.| Air Products vs. Hong Kong Land | Air Products vs. Neometals | Air Products vs. Coor Service Management | Air Products vs. Fidelity Sustainable USD |
| Fortune Brands vs. Hong Kong Land | Fortune Brands vs. Neometals | Fortune Brands vs. Coor Service Management | Fortune Brands vs. Fidelity Sustainable USD |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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