Correlation Between AIR PRODCHEMICALS and Waste Management
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and Waste Management 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 Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and Waste Management, you can compare the effects of market volatilities on AIR PRODCHEMICALS and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and Waste Management.
Diversification Opportunities for AIR PRODCHEMICALS and Waste Management
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIR and Waste is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Waste Management go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and Waste Management
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 1.24 times more return on investment than Waste Management. However, AIR PRODCHEMICALS is 1.24 times more volatile than Waste Management. It trades about 0.15 of its potential returns per unit of risk. Waste Management is currently generating about 0.06 per unit of risk. If you would invest 20,926 in AIR PRODCHEMICALS on August 27, 2024 and sell it today you would earn a total of 10,424 from holding AIR PRODCHEMICALS or generate 49.81% 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. Waste Management
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| Waste Management |
AIR PRODCHEMICALS and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and Waste Management
The main advantage of trading using opposite AIR PRODCHEMICALS and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Microsoft |
| Waste Management vs. APPLIED MATERIALS | Waste Management vs. Vulcan Materials | Waste Management vs. Sumitomo Rubber Industries | Waste Management vs. VULCAN MATERIALS |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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