Correlation Between Air Products and Zegona Communications

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

Diversification Opportunities for Air Products and Zegona Communications

-0.22

Correlation Coefficient

Air Products  Zegona Communications

Very good diversification

The 3 months correlation between Air and Zegona is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Zegona Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zegona Communications Plc 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 Zegona Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zegona Communications Plc has no effect on the direction of Air Products i.e., Air Products and Zegona Communications go up and down completely randomly.

Pair Corralation between Air Products and Zegona Communications

Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 0.72 times more return on investment than Zegona Communications. However, Air Products Chemicals is 1.39 times less risky than Zegona Communications. It trades about 0.19 of its potential returns per unit of risk. Zegona Communications Plc is currently generating about 0.01 per unit of risk. If you would invest  27,384  in Air Products Chemicals on September 4, 2024 and sell it today you would earn a total of  5,908  from holding Air Products Chemicals or generate 21.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Air Products Chemicals  vs.  Zegona Communications Plc

Air Products Chemicals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Air Products unveiled solid returns over the last few months and may actually be approaching a breakup point.

Zegona Communications Plc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Zegona Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zegona Communications is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Air Products and Zegona Communications

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

The idea behind Air Products Chemicals and Zegona Communications Plc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.