Correlation Between Air Products and China Resources
Can any of the company-specific risk be diversified away by investing in both Air Products and China Resources 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 Products and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products and and China Resources Power, you can compare the effects of market volatilities on Air Products and China Resources 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 Products with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and China Resources.
Diversification Opportunities for Air Products and China Resources
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and China is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power and Air Products 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 Products and are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Power has no effect on the direction of Air Products i.e., Air Products and China Resources go up and down completely randomly.
Pair Corralation between Air Products and China Resources
Considering the 90-day investment horizon Air Products is expected to generate 2.28 times less return on investment than China Resources. But when comparing it to its historical volatility, Air Products and is 3.43 times less risky than China Resources. It trades about 0.08 of its potential returns per unit of risk. China Resources Power is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 180.00 in China Resources Power on September 12, 2024 and sell it today you would earn a total of 45.00 from holding China Resources Power or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products and vs. China Resources Power
Performance |
| Timeline |
| Air Products |
| China Resources Power |
Air Products and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and China Resources
The main advantage of trading using opposite Air Products and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Air Products vs. Griffon | Air Products vs. Merck Company | Air Products vs. Brinker International | Air Products vs. Alcoa Corp |
| China Resources vs. NRG Energy | China Resources vs. TransAlta Corp | China Resources vs. Kenon Holdings | China Resources vs. Pampa Energia SA |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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