Correlation Between AIR PRODCHEMICALS and KINGBOARD CHEMICAL
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and KINGBOARD CHEMICAL 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 PRODCHEMICALS and KINGBOARD CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and KINGBOARD CHEMICAL, you can compare the effects of market volatilities on AIR PRODCHEMICALS and KINGBOARD CHEMICAL 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 PRODCHEMICALS with a short position of KINGBOARD CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and KINGBOARD CHEMICAL.
Diversification Opportunities for AIR PRODCHEMICALS and KINGBOARD CHEMICAL
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIR and KINGBOARD is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and KINGBOARD CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINGBOARD CHEMICAL and AIR PRODCHEMICALS 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 PRODCHEMICALS are associated (or correlated) with KINGBOARD CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINGBOARD CHEMICAL has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and KINGBOARD CHEMICAL go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and KINGBOARD CHEMICAL
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 1.3 times less return on investment than KINGBOARD CHEMICAL. But when comparing it to its historical volatility, AIR PRODCHEMICALS is 2.16 times less risky than KINGBOARD CHEMICAL. It trades about 0.15 of its potential returns per unit of risk. KINGBOARD CHEMICAL is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 149.00 in KINGBOARD CHEMICAL on August 27, 2024 and sell it today you would earn a total of 85.00 from holding KINGBOARD CHEMICAL or generate 57.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. KINGBOARD CHEMICAL
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| KINGBOARD CHEMICAL |
AIR PRODCHEMICALS and KINGBOARD CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and KINGBOARD CHEMICAL
The main advantage of trading using opposite AIR PRODCHEMICALS and KINGBOARD CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL will offset losses from the drop in KINGBOARD CHEMICAL's long position.| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Microsoft |
| KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Microsoft |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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