Correlation Between Air Products and Valens

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

Diversification Opportunities for Air Products and Valens

-0.47

Correlation Coefficient

Air Products  Valens

Very good diversification

The 3 months correlation between Air and Valens is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Air Products i.e., Air Products and Valens go up and down completely randomly.

Pair Corralation between Air Products and Valens

Considering the 90-day investment horizon Air Products and is expected to generate 0.38 times more return on investment than Valens. However, Air Products and is 2.62 times less risky than Valens. It trades about 0.21 of its potential returns per unit of risk. Valens is currently generating about -0.01 per unit of risk. If you would invest  27,355  in Air Products and on September 2, 2024 and sell it today you would earn a total of  6,078  from holding Air Products and or generate 22.22% return on investment over 90 days.

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

Air Products and  vs.  Valens

Air Products

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Air Products and Valens

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

The idea behind Air Products and and Valens 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.