Correlation Between Air Products and Sable Offshore

Can any of the company-specific risk be diversified away by investing in both Air Products and Sable Offshore 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 Sable Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Products and and Sable Offshore Corp, you can compare the effects of market volatilities on Air Products and Sable Offshore 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 Sable Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Sable Offshore.

Diversification Opportunities for Air Products and Sable Offshore

-0.54

Correlation Coefficient

Air Products  Sable Offshore

Excellent diversification

The 3 months correlation between Air and Sable is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Sable Offshore Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sable Offshore 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 and are associated (or correlated) with Sable Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sable Offshore Corp has no effect on the direction of Air Products i.e., Air Products and Sable Offshore go up and down completely randomly.

Pair Corralation between Air Products and Sable Offshore

Considering the 90-day investment horizon Air Products is expected to generate 9.75 times less return on investment than Sable Offshore. But when comparing it to its historical volatility, Air Products and is 1.89 times less risky than Sable Offshore. It trades about 0.01 of its potential returns per unit of risk. Sable Offshore Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,003  in Sable Offshore Corp on September 17, 2024 and sell it today you would earn a total of  1,180  from holding Sable Offshore Corp or generate 117.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.57%
Values	Daily Returns

Air Products and  vs.  Sable Offshore Corp

Air Products

Risk-Adjusted Performance

6 of 100

Modest

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

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Air Products and Sable Offshore

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

The idea behind Air Products and and Sable Offshore 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.