Correlation Between Liberty Media and Air Products
Can any of the company-specific risk be diversified away by investing in both Liberty Media and Air Products 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 Liberty Media and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Media Corp and Air Products Chemicals, you can compare the effects of market volatilities on Liberty Media and Air Products 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 Liberty Media with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Air Products.
Diversification Opportunities for Liberty Media and Air Products
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Liberty and Air is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media Corp and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and Liberty Media 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 Liberty Media Corp are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Liberty Media i.e., Liberty Media and Air Products go up and down completely randomly.
Pair Corralation between Liberty Media and Air Products
Assuming the 90 days trading horizon Liberty Media is expected to generate 4.09 times less return on investment than Air Products. But when comparing it to its historical volatility, Liberty Media Corp is 6.43 times less risky than Air Products. It trades about 0.09 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 26,782 in Air Products Chemicals on September 1, 2024 and sell it today you would earn a total of 6,447 from holding Air Products Chemicals or generate 24.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Media Corp vs. Air Products Chemicals
Performance |
| Timeline |
| Liberty Media Corp |
| Air Products Chemicals |
Liberty Media and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Media and Air Products
The main advantage of trading using opposite Liberty Media and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Liberty Media vs. Applied Materials | Liberty Media vs. XLMedia PLC | Liberty Media vs. Grand Vision Media | Liberty Media vs. Hollywood Bowl Group |
| Air Products vs. Uniper SE | Air Products vs. Mulberry Group PLC | Air Products vs. London Security Plc | Air Products vs. Triad Group PLC |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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