Correlation Between BRIT AMER and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both BRIT AMER and AIR PRODCHEMICALS 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 BRIT AMER and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRIT AMER TOBACCO and AIR PRODCHEMICALS, you can compare the effects of market volatilities on BRIT AMER and AIR PRODCHEMICALS 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 BRIT AMER with a short position of AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and AIR PRODCHEMICALS.
Diversification Opportunities for BRIT AMER and AIR PRODCHEMICALS
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BRIT and AIR is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of BRIT AMER i.e., BRIT AMER and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between BRIT AMER and AIR PRODCHEMICALS
Assuming the 90 days trading horizon BRIT AMER is expected to generate 1.46 times less return on investment than AIR PRODCHEMICALS. But when comparing it to its historical volatility, BRIT AMER TOBACCO is 1.42 times less risky than AIR PRODCHEMICALS. It trades about 0.02 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 28,781 in AIR PRODCHEMICALS on September 3, 2024 and sell it today you would earn a total of 2,849 from holding AIR PRODCHEMICALS or generate 9.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRIT AMER TOBACCO vs. AIR PRODCHEMICALS
Performance |
| Timeline |
| BRIT AMER TOBACCO |
| AIR PRODCHEMICALS |
BRIT AMER and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRIT AMER and AIR PRODCHEMICALS
The main advantage of trading using opposite BRIT AMER and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.| BRIT AMER vs. FEMALE HEALTH | BRIT AMER vs. PARKEN Sport Entertainment | BRIT AMER vs. Amkor Technology | BRIT AMER vs. CVS Health |
| AIR PRODCHEMICALS vs. Tsingtao Brewery | AIR PRODCHEMICALS vs. Broadwind | AIR PRODCHEMICALS vs. National Beverage Corp | AIR PRODCHEMICALS vs. United Breweries Co |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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