Correlation Between Air Products and Beeks Trading

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

Diversification Opportunities for Air Products and Beeks Trading

0.25

Correlation Coefficient

Air Products  Beeks Trading

Modest diversification

The 3 months correlation between Air and Beeks is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Beeks Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beeks Trading 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 Beeks Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beeks Trading has no effect on the direction of Air Products i.e., Air Products and Beeks Trading go up and down completely randomly.

Pair Corralation between Air Products and Beeks Trading

Assuming the 90 days trading horizon Air Products is expected to generate 1.65 times less return on investment than Beeks Trading. In addition to that, Air Products is 1.77 times more volatile than Beeks Trading. It trades about 0.02 of its total potential returns per unit of risk. Beeks Trading is currently generating about 0.07 per unit of volatility. If you would invest  13,650  in Beeks Trading on September 19, 2024 and sell it today you would earn a total of  15,750  from holding Beeks Trading or generate 115.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Air Products Chemicals  vs.  Beeks Trading

Air Products Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Beeks Trading

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beeks Trading are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Beeks Trading exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Products and Beeks Trading

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

The idea behind Air Products Chemicals and Beeks Trading 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.