Correlation Between Air Products and White Mountains
Can any of the company-specific risk be diversified away by investing in both Air Products and White Mountains 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 White Mountains 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 White Mountains Insurance, you can compare the effects of market volatilities on Air Products and White Mountains 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 White Mountains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and White Mountains.
Diversification Opportunities for Air Products and White Mountains
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and White is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and White Mountains Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on White Mountains Insurance 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 White Mountains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of White Mountains Insurance has no effect on the direction of Air Products i.e., Air Products and White Mountains go up and down completely randomly.
Pair Corralation between Air Products and White Mountains
Considering the 90-day investment horizon Air Products and is expected to under-perform the White Mountains. But the stock apears to be less risky and, when comparing its historical volatility, Air Products and is 1.31 times less risky than White Mountains. The stock trades about -0.59 of its potential returns per unit of risk. The White Mountains Insurance is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 198,834 in White Mountains Insurance on September 23, 2024 and sell it today you would lose (5,744) from holding White Mountains Insurance or give up 2.89% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Air Products and vs. White Mountains Insurance
Performance |
Timeline |
Air Products |
White Mountains Insurance |
Air Products and White Mountains Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Air Products and White Mountains
The main advantage of trading using opposite Air Products and White Mountains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, White Mountains 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 White Mountains will offset losses from the drop in White Mountains' long position.Air Products vs. PPG Industries | Air Products vs. Sherwin Williams Co | Air Products vs. Ecolab Inc | Air Products vs. Albemarle Corp |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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