Correlation Between Air Products and Law Debenture
Can any of the company-specific risk be diversified away by investing in both Air Products and Law Debenture 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 Law Debenture 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 Law Debenture Corp, you can compare the effects of market volatilities on Air Products and Law Debenture 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 Law Debenture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Law Debenture.
Diversification Opportunities for Air Products and Law Debenture
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and Law is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Law Debenture Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Law Debenture Corp 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 Law Debenture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Law Debenture Corp has no effect on the direction of Air Products i.e., Air Products and Law Debenture go up and down completely randomly.
Pair Corralation between Air Products and Law Debenture
Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 1.4 times more return on investment than Law Debenture. However, Air Products is 1.4 times more volatile than Law Debenture Corp. It trades about 0.24 of its potential returns per unit of risk. Law Debenture Corp is currently generating about 0.09 per unit of risk. If you would invest 31,616 in Air Products Chemicals on August 28, 2024 and sell it today you would earn a total of 1,875 from holding Air Products Chemicals or generate 5.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products Chemicals vs. Law Debenture Corp
Performance |
| Timeline |
| Air Products Chemicals |
| Law Debenture Corp |
Air Products and Law Debenture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Law Debenture
The main advantage of trading using opposite Air Products and Law Debenture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Law Debenture 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 Law Debenture will offset losses from the drop in Law Debenture's long position.| Air Products vs. Induction Healthcare Group | Air Products vs. Naturhouse Health SA | Air Products vs. Playtech Plc | Air Products vs. Gamma Communications PLC |
| Law Debenture vs. Edita Food Industries | Law Debenture vs. Fair Oaks Income | Law Debenture vs. Air Products Chemicals | Law Debenture vs. Westlake Chemical Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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