Correlation Between Applied Materials and Air Products
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Air Products Chemicals, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Air Products.
Diversification Opportunities for Applied Materials and Air Products
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Air is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Air Products go up and down completely randomly.
Pair Corralation between Applied Materials and Air Products
Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Air Products. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 3.18 times less risky than Air Products. The stock trades about -0.02 of its potential returns per unit of risk. The Air Products Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 24,632 in Air Products Chemicals on September 3, 2024 and sell it today you would earn a total of 8,597 from holding Air Products Chemicals or generate 34.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.67% |
| Values | Daily Returns |
Applied Materials vs. Air Products Chemicals
Performance |
| Timeline |
| Applied Materials |
| Air Products Chemicals |
Applied Materials and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Air Products
The main advantage of trading using opposite Applied Materials and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. SMA Solar Technology | Applied Materials vs. Arcticzymes Technologies ASA | Applied Materials vs. DXC Technology Co | Applied Materials vs. Waste Management |
| Air Products vs. Morgan Advanced Materials | Air Products vs. Applied Materials | Air Products vs. Compagnie Plastic Omnium | Air Products vs. Spirent Communications 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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