Correlation Between Air Products and Silvercorp Metals

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

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

Diversification Opportunities for Air Products and Silvercorp Metals

0.31

Correlation Coefficient

Air Products  Silvercorp Metals

Weak diversification

The 3 months correlation between Air and Silvercorp is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Silvercorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silvercorp Metals 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 Chemicals are associated (or correlated) with Silvercorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silvercorp Metals has no effect on the direction of Air Products i.e., Air Products and Silvercorp Metals go up and down completely randomly.

Pair Corralation between Air Products and Silvercorp Metals

Assuming the 90 days trading horizon Air Products Chemicals is expected to under-perform the Silvercorp Metals. But the stock apears to be less risky and, when comparing its historical volatility, Air Products Chemicals is 1.7 times less risky than Silvercorp Metals. The stock trades about -0.04 of its potential returns per unit of risk. The Silvercorp Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  462.00  in Silvercorp Metals on December 3, 2024 and sell it today you would earn a total of  76.00  from holding Silvercorp Metals or generate 16.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Air Products Chemicals  vs.  Silvercorp Metals

Air Products Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Products Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Air Products is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Silvercorp Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silvercorp Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Silvercorp Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Products and Silvercorp Metals

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

The idea behind Air Products Chemicals and Silvercorp Metals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.