Correlation Between AIR PRODCHEMICALS and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and STMICROELECTRONICS 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 STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and STMICROELECTRONICS, you can compare the effects of market volatilities on AIR PRODCHEMICALS and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and STMICROELECTRONICS.
Diversification Opportunities for AIR PRODCHEMICALS and STMICROELECTRONICS
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between AIR and STMICROELECTRONICS is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and STMICROELECTRONICS
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.54 times more return on investment than STMICROELECTRONICS. However, AIR PRODCHEMICALS is 1.85 times less risky than STMICROELECTRONICS. It trades about 0.41 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about 0.1 per unit of risk. If you would invest 28,090 in AIR PRODCHEMICALS on October 24, 2024 and sell it today you would earn a total of 2,610 from holding AIR PRODCHEMICALS or generate 9.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. STMICROELECTRONICS
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| STMICROELECTRONICS |
AIR PRODCHEMICALS and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and STMICROELECTRONICS
The main advantage of trading using opposite AIR PRODCHEMICALS and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc |
| STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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