Correlation Between Air Products and Diversified Energy
Can any of the company-specific risk be diversified away by investing in both Air Products and Diversified Energy 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 Diversified Energy 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 Diversified Energy, you can compare the effects of market volatilities on Air Products and Diversified Energy 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 Diversified Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Diversified Energy.
Diversification Opportunities for Air Products and Diversified Energy
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Diversified is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy 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 Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Air Products i.e., Air Products and Diversified Energy go up and down completely randomly.
Pair Corralation between Air Products and Diversified Energy
Considering the 90-day investment horizon Air Products and is expected to under-perform the Diversified Energy. But the stock apears to be less risky and, when comparing its historical volatility, Air Products and is 2.77 times less risky than Diversified Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Diversified Energy is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 1,313 in Diversified Energy on September 14, 2024 and sell it today you would earn a total of 341.00 from holding Diversified Energy or generate 25.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products and vs. Diversified Energy
Performance |
| Timeline |
| Air Products |
| Diversified Energy |
Air Products and Diversified Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Diversified Energy
The main advantage of trading using opposite Air Products and Diversified Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Diversified Energy 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 Diversified Energy will offset losses from the drop in Diversified Energy's long position.| Air Products vs. PPG Industries | Air Products vs. Sherwin Williams Co | Air Products vs. Ecolab Inc | Air Products vs. Albemarle Corp |
| Diversified Energy vs. Sealed Air | Diversified Energy vs. Air Products and | Diversified Energy vs. Mangazeya Mining | Diversified Energy vs. Sensient Technologies |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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