Correlation Between Advanced Medical and Air Products
Can any of the company-specific risk be diversified away by investing in both Advanced Medical 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 Advanced Medical and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Medical Solutions and Air Products Chemicals, you can compare the effects of market volatilities on Advanced Medical 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 Advanced Medical with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Medical and Air Products.
Diversification Opportunities for Advanced Medical and Air Products
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advanced and Air is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions 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 Advanced Medical 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 Advanced Medical Solutions 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 Advanced Medical i.e., Advanced Medical and Air Products go up and down completely randomly.
Pair Corralation between Advanced Medical and Air Products
Assuming the 90 days trading horizon Advanced Medical Solutions is expected to generate 1.35 times more return on investment than Air Products. However, Advanced Medical is 1.35 times more volatile than Air Products Chemicals. It trades about 0.02 of its potential returns per unit of risk. Air Products Chemicals is currently generating about -0.07 per unit of risk. If you would invest 20,800 in Advanced Medical Solutions on November 28, 2024 and sell it today you would earn a total of 50.00 from holding Advanced Medical Solutions or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Medical Solutions vs. Air Products Chemicals
Performance |
| Timeline |
| Advanced Medical Sol |
| Air Products Chemicals |
Advanced Medical and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Medical and Air Products
The main advantage of trading using opposite Advanced Medical and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical 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.| Advanced Medical vs. Flow Traders NV | Advanced Medical vs. MediaZest plc | Advanced Medical vs. Broadridge Financial Solutions | Advanced Medical vs. Live Nation Entertainment |
| Air Products vs. Flutter Entertainment PLC | Air Products vs. LBG Media PLC | Air Products vs. Electronic Arts | Air Products vs. G5 Entertainment AB |
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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