Correlation Between Cars and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and AIR PRODCHEMICALS, you can compare the effects of market volatilities on Cars 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 Cars with a short position of AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and AIR PRODCHEMICALS.
Diversification Opportunities for Cars and AIR PRODCHEMICALS
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cars and AIR is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and Cars 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 Cars Inc 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 Cars i.e., Cars and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between Cars and AIR PRODCHEMICALS
Assuming the 90 days horizon Cars Inc is expected to generate 1.73 times more return on investment than AIR PRODCHEMICALS. However, Cars is 1.73 times more volatile than AIR PRODCHEMICALS. It trades about 0.03 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.01 per unit of risk. If you would invest 1,350 in Cars Inc on September 28, 2024 and sell it today you would earn a total of 320.00 from holding Cars Inc or generate 23.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. AIR PRODCHEMICALS
Performance |
| Timeline |
| Cars Inc |
| AIR PRODCHEMICALS |
Cars and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and AIR PRODCHEMICALS
The main advantage of trading using opposite Cars and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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.The idea behind Cars Inc and AIR PRODCHEMICALS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| AIR PRODCHEMICALS vs. Merit Medical Systems | AIR PRODCHEMICALS vs. CompuGroup Medical SE | AIR PRODCHEMICALS vs. SCANDMEDICAL SOLDK 040 | AIR PRODCHEMICALS vs. Shenandoah Telecommunications |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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