Correlation Between Air Products and Sealed Air

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Can any of the company-specific risk be diversified away by investing in both Air Products and Sealed Air 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 Air Products and Sealed Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Sealed Air Corp, you can compare the effects of market volatilities on Air Products and Sealed Air 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 Air Products with a short position of Sealed Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Sealed Air.

Diversification Opportunities for Air Products and Sealed Air

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Air and Sealed is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Sealed Air Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air Corp and Air Products 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 Air Products Chemicals are associated (or correlated) with Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air Corp has no effect on the direction of Air Products i.e., Air Products and Sealed Air go up and down completely randomly.

Pair Corralation between Air Products and Sealed Air

Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 1.25 times more return on investment than Sealed Air. However, Air Products is 1.25 times more volatile than Sealed Air Corp. It trades about 0.07 of its potential returns per unit of risk. Sealed Air Corp is currently generating about 0.08 per unit of risk. If you would invest  28,827  in Air Products Chemicals on September 18, 2024 and sell it today you would earn a total of  1,983  from holding Air Products Chemicals or generate 6.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy93.75%
ValuesDaily Returns

Air Products Chemicals  vs.  Sealed Air Corp

 Performance 
       Timeline  
Air Products Chemicals 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Air Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Sealed Air Corp 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sealed Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Air Products and Sealed Air Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Air Products and Sealed Air

The main advantage of trading using opposite Air Products and Sealed Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Sealed Air 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 Sealed Air will offset losses from the drop in Sealed Air's long position.
The idea behind Air Products Chemicals and Sealed Air Corp 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.
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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