Correlation Between Air Products and Sea
Can any of the company-specific risk be diversified away by investing in both Air Products and Sea 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 Sea 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 Sea, you can compare the effects of market volatilities on Air Products and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Sea.
Diversification Opportunities for Air Products and Sea
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and Sea is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Air Products i.e., Air Products and Sea go up and down completely randomly.
Pair Corralation between Air Products and Sea
Considering the 90-day investment horizon Air Products is expected to generate 3.32 times less return on investment than Sea. But when comparing it to its historical volatility, Air Products and is 1.86 times less risky than Sea. It trades about 0.17 of its potential returns per unit of risk. Sea is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 5,994 in Sea on September 4, 2024 and sell it today you would earn a total of 5,330 from holding Sea or generate 88.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products and vs. Sea
Performance |
| Timeline |
| Air Products |
| Sea |
Air Products and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Sea
The main advantage of trading using opposite Air Products and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| Air Products vs. PPG Industries | Air Products vs. Sherwin Williams Co | Air Products vs. Ecolab Inc | Air Products vs. Albemarle Corp |
| Sea vs. Atari SA | Sea vs. Victory Square Technologies | Sea vs. Motorsport Gaming Us | Sea vs. Alpha Esports Tech |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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