Correlation Between Fidus Investment and Air Products

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

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

Diversification Opportunities for Fidus Investment and Air Products

0.55

Correlation Coefficient

Fidus Investment  Air Products

Very weak diversification

The 3 months correlation between Fidus and Air is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment Corp and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Fidus Investment 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 Fidus Investment Corp are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Fidus Investment i.e., Fidus Investment and Air Products go up and down completely randomly.

Pair Corralation between Fidus Investment and Air Products

Given the investment horizon of 90 days Fidus Investment is expected to generate 2.66 times less return on investment than Air Products. But when comparing it to its historical volatility, Fidus Investment Corp is 2.09 times less risky than Air Products. It trades about 0.17 of its potential returns per unit of risk. Air Products and is currently generating about 0.21 of returns per unit of risk over similar time horizon. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Fidus Investment Corp  vs.  Air Products and

Fidus Investment Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Fidus Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Fidus Investment and Air Products

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

The idea behind Fidus Investment Corp and Air Products and 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.