Correlation Between Air Products and Chrysalis Investments
Can any of the company-specific risk be diversified away by investing in both Air Products and Chrysalis Investments 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 Chrysalis Investments 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 Chrysalis Investments, you can compare the effects of market volatilities on Air Products and Chrysalis Investments 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 Chrysalis Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Chrysalis Investments.
Diversification Opportunities for Air Products and Chrysalis Investments
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Chrysalis is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Chrysalis Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chrysalis Investments 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 Chrysalis Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chrysalis Investments has no effect on the direction of Air Products i.e., Air Products and Chrysalis Investments go up and down completely randomly.
Pair Corralation between Air Products and Chrysalis Investments
Assuming the 90 days trading horizon Air Products is expected to generate 1.74 times less return on investment than Chrysalis Investments. But when comparing it to its historical volatility, Air Products Chemicals is 1.19 times less risky than Chrysalis Investments. It trades about 0.27 of its potential returns per unit of risk. Chrysalis Investments is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 8,530 in Chrysalis Investments on September 1, 2024 and sell it today you would earn a total of 1,100 from holding Chrysalis Investments or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Air Products Chemicals vs. Chrysalis Investments
Performance |
| Timeline |
| Air Products Chemicals |
| Chrysalis Investments |
Air Products and Chrysalis Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Chrysalis Investments
The main advantage of trading using opposite Air Products and Chrysalis Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Chrysalis Investments 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 Chrysalis Investments will offset losses from the drop in Chrysalis Investments' long position.| Air Products vs. Uniper SE | Air Products vs. Mulberry Group PLC | Air Products vs. London Security Plc | Air Products vs. Triad Group PLC |
| Chrysalis Investments vs. Alfa Financial Software | Chrysalis Investments vs. Gaming Realms plc | Chrysalis Investments vs. Air Products Chemicals | Chrysalis Investments vs. X FAB Silicon Foundries |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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