Correlation Between Ross Stores and Air Products
Can any of the company-specific risk be diversified away by investing in both Ross Stores 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 Ross Stores and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Air Products Chemicals, you can compare the effects of market volatilities on Ross Stores 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 Ross Stores with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Air Products.
Diversification Opportunities for Ross Stores and Air Products
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ross and Air is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores 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 Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and Air Products go up and down completely randomly.
Pair Corralation between Ross Stores and Air Products
Assuming the 90 days trading horizon Ross Stores is expected to generate 3.3 times less return on investment than Air Products. But when comparing it to its historical volatility, Ross Stores is 1.17 times less risky than Air Products. It trades about 0.03 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 26,171 in Air Products Chemicals on October 25, 2024 and sell it today you would earn a total of 5,342 from holding Air Products Chemicals or generate 20.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. Air Products Chemicals
Performance |
| Timeline |
| Ross Stores |
| Air Products Chemicals |
Ross Stores and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Air Products
The main advantage of trading using opposite Ross Stores and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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.| Ross Stores vs. Cornish Metals | Ross Stores vs. Coeur Mining | Ross Stores vs. First Class Metals | Ross Stores vs. Rheinmetall AG |
| Air Products vs. Flutter Entertainment PLC | Air Products vs. Ubisoft Entertainment | Air Products vs. Grand Vision Media | Air Products vs. GlobalData 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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