Correlation Between AIR PRODCHEMICALS and BLUELINX HLDGS

Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and BLUELINX HLDGS 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 PRODCHEMICALS and BLUELINX HLDGS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIR PRODCHEMICALS and BLUELINX HLDGS DL 01, you can compare the effects of market volatilities on AIR PRODCHEMICALS and BLUELINX HLDGS 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 PRODCHEMICALS with a short position of BLUELINX HLDGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and BLUELINX HLDGS.

Diversification Opportunities for AIR PRODCHEMICALS and BLUELINX HLDGS

0.71

Correlation Coefficient

AIR PRODCHEMICALS  BLUELINX HLDGS

Poor diversification

The 3 months correlation between AIR and BLUELINX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and BLUELINX HLDGS DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLUELINX HLDGS DL and AIR PRODCHEMICALS 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 PRODCHEMICALS are associated (or correlated) with BLUELINX HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLUELINX HLDGS DL has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and BLUELINX HLDGS go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and BLUELINX HLDGS

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.5 times more return on investment than BLUELINX HLDGS. However, AIR PRODCHEMICALS is 2.0 times less risky than BLUELINX HLDGS. It trades about 0.1 of its potential returns per unit of risk. BLUELINX HLDGS DL 01 is currently generating about 0.04 per unit of risk. If you would invest  25,670  in AIR PRODCHEMICALS on September 22, 2024 and sell it today you would earn a total of  2,590  from holding AIR PRODCHEMICALS or generate 10.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

AIR PRODCHEMICALS  vs.  BLUELINX HLDGS DL 01

AIR PRODCHEMICALS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AIR PRODCHEMICALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BLUELINX HLDGS DL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BLUELINX HLDGS DL 01 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, BLUELINX HLDGS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AIR PRODCHEMICALS and BLUELINX HLDGS

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

The idea behind AIR PRODCHEMICALS and BLUELINX HLDGS DL 01 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.