Correlation Between Caledonia Mining and Air Products
Can any of the company-specific risk be diversified away by investing in both Caledonia Mining and Air Products 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 Caledonia Mining and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Mining and Air Products Chemicals, you can compare the effects of market volatilities on Caledonia Mining and Air Products 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 Caledonia Mining with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Air Products.
Diversification Opportunities for Caledonia Mining and Air Products
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Caledonia and Air is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and Caledonia Mining 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 Caledonia Mining are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Air Products go up and down completely randomly.
Pair Corralation between Caledonia Mining and Air Products
Assuming the 90 days trading horizon Caledonia Mining is expected to generate 7.32 times less return on investment than Air Products. But when comparing it to its historical volatility, Caledonia Mining is 4.36 times less risky than Air Products. It trades about 0.04 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 24,632 in Air Products Chemicals on September 3, 2024 and sell it today you would earn a total of 8,597 from holding Air Products Chemicals or generate 34.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.67% |
| Values | Daily Returns |
Caledonia Mining vs. Air Products Chemicals
Performance |
| Timeline |
| Caledonia Mining |
| Air Products Chemicals |
Caledonia Mining and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Mining and Air Products
The main advantage of trading using opposite Caledonia Mining and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Mining position performs unexpectedly, Air Products 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 Products will offset losses from the drop in Air Products' long position.The idea behind Caledonia Mining and Air Products Chemicals 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 Products vs. Morgan Advanced Materials | Air Products vs. Applied Materials | Air Products vs. Compagnie Plastic Omnium | Air Products vs. Spirent Communications plc |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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