Correlation Between Livent Corp and Air Products

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

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

Diversification Opportunities for Livent Corp and Air Products

0.81

Correlation Coefficient

Livent Corp  Air Products

Very poor diversification

The 3 months correlation between Livent and Air is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Livent 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 Livent Corp 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 Livent 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 Livent Corp i.e., Livent Corp and Air Products go up and down completely randomly.

Pair Corralation between Livent Corp and Air Products

If you would invest  27,719  in Air Products and on August 30, 2024 and sell it today you would earn a total of  5,603  from holding Air Products and or generate 20.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

Livent Corp  vs.  Air Products and

Livent Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Air Products

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 15 (%) 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 Livent Corp and Air Products

The main advantage of trading using opposite Livent Corp and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Livent Corp 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 Livent 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.