Correlation Between Air Products and Hansa Investment

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

Diversification Opportunities for Air Products and Hansa Investment

0.06

Correlation Coefficient

Air Products  Hansa Investment

Significant diversification

The 3 months correlation between Air and Hansa is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Hansa Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansa Investment 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 Hansa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansa Investment has no effect on the direction of Air Products i.e., Air Products and Hansa Investment go up and down completely randomly.

Pair Corralation between Air Products and Hansa Investment

Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 0.93 times more return on investment than Hansa Investment. However, Air Products Chemicals is 1.08 times less risky than Hansa Investment. It trades about 0.02 of its potential returns per unit of risk. Hansa Investment is currently generating about -0.05 per unit of risk. If you would invest  28,979  in Air Products Chemicals on December 30, 2024 and sell it today you would earn a total of  311.00  from holding Air Products Chemicals or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Air Products Chemicals  vs.  Hansa Investment

Air Products Chemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 1 (%) 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.

Hansa Investment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Air Products and Hansa Investment

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

The idea behind Air Products Chemicals and Hansa Investment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.