Correlation Between Air Products and Gold Bullion

Can any of the company-specific risk be diversified away by investing in both Air Products and Gold Bullion 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 Gold Bullion 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 Gold Bullion Securities, you can compare the effects of market volatilities on Air Products and Gold Bullion 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 Gold Bullion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Gold Bullion.

Diversification Opportunities for Air Products and Gold Bullion

0.56

Correlation Coefficient

Air Products  Gold Bullion

Very weak diversification

The 3 months correlation between Air and Gold is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Gold Bullion Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion Securities 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 Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion Securities has no effect on the direction of Air Products i.e., Air Products and Gold Bullion go up and down completely randomly.

Pair Corralation between Air Products and Gold Bullion

Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 1.91 times more return on investment than Gold Bullion. However, Air Products is 1.91 times more volatile than Gold Bullion Securities. It trades about 0.02 of its potential returns per unit of risk. Gold Bullion Securities is currently generating about 0.04 per unit of risk. If you would invest  29,283  in Air Products Chemicals on September 23, 2024 and sell it today you would earn a total of  37.00  from holding Air Products Chemicals or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Air Products Chemicals  vs.  Gold Bullion Securities

Air Products Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Air Products is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Gold Bullion Securities

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Bullion Securities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gold Bullion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Air Products and Gold Bullion

The main advantage of trading using opposite Air Products and Gold Bullion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Gold Bullion 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 Gold Bullion will offset losses from the drop in Gold Bullion's long position.

The idea behind Air Products Chemicals and Gold Bullion Securities 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.