Correlation Between Optima Health and Air Products
Can any of the company-specific risk be diversified away by investing in both Optima Health 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 Optima Health and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optima Health plc and Air Products Chemicals, you can compare the effects of market volatilities on Optima Health 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 Optima Health with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Health and Air Products.
Diversification Opportunities for Optima Health and Air Products
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Optima and Air is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc 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 Optima Health 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 Optima Health plc 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 Optima Health i.e., Optima Health and Air Products go up and down completely randomly.
Pair Corralation between Optima Health and Air Products
Assuming the 90 days trading horizon Optima Health is expected to generate 1.86 times less return on investment than Air Products. But when comparing it to its historical volatility, Optima Health plc is 3.86 times less risky than Air Products. It trades about 0.05 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 30,221 in Air Products Chemicals on August 30, 2024 and sell it today you would earn a total of 3,118 from holding Air Products Chemicals or generate 10.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 9.26% |
| Values | Daily Returns |
Optima Health plc vs. Air Products Chemicals
Performance |
| Timeline |
| Optima Health plc |
| Air Products Chemicals |
Optima Health and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optima Health and Air Products
The main advantage of trading using opposite Optima Health and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Health 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.| Optima Health vs. Toyota Motor Corp | Optima Health vs. OTP Bank Nyrt | Optima Health vs. Cognizant Technology Solutions | Optima Health vs. Lendinvest PLC |
| Air Products vs. Tungsten West PLC | Air Products vs. Argo Group Limited | Air Products vs. Hardide PLC | Air Products vs. Versarien 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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