Correlation Between Basic Materials and Air Products
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Air Products and, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Air Products.
Diversification Opportunities for Basic Materials and Air Products
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Basic and Air is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Basic Materials 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 Basic Materials 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 has no effect on the direction of Basic Materials i.e., Basic Materials and Air Products go up and down completely randomly.
Pair Corralation between Basic Materials and Air Products
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Air Products. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 1.51 times less risky than Air Products. The index trades about -0.65 of its potential returns per unit of risk. The Air Products and is currently generating about -0.34 of returns per unit of risk over similar time horizon. If you would invest 49,749 in Air Products and on October 12, 2024 and sell it today you would lose (4,899) from holding Air Products and or give up 9.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Basic Materials vs. Air Products and
Performance |
| Timeline |
Basic Materials and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Air Products and
Pair trading matchups for Air Products
Pair Trading with Basic Materials and Air Products
The main advantage of trading using opposite Basic Materials and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. Capital One Financial | Basic Materials vs. Broadridge Financial Solutions, | Basic Materials vs. Truist Financial | Basic Materials vs. Discover Financial Services |
| Air Products vs. Pure Storage, | Air Products vs. HCA Healthcare, | Air Products vs. Clover Health Investments, | Air Products vs. Cardinal Health, |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |