Correlation Between Air Products and Versarien PLC

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

Diversification Opportunities for Air Products and Versarien PLC

0.28

Correlation Coefficient

Air Products  Versarien PLC

Modest diversification

The 3 months correlation between Air and Versarien is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Versarien PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versarien PLC 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 Versarien PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versarien PLC has no effect on the direction of Air Products i.e., Air Products and Versarien PLC go up and down completely randomly.

Pair Corralation between Air Products and Versarien PLC

Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 0.31 times more return on investment than Versarien PLC. However, Air Products Chemicals is 3.22 times less risky than Versarien PLC. It trades about 0.01 of its potential returns per unit of risk. Versarien PLC is currently generating about -0.04 per unit of risk. If you would invest  29,051  in Air Products Chemicals on December 22, 2024 and sell it today you would lose (26.00) from holding Air Products Chemicals or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Air Products Chemicals  vs.  Versarien PLC

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.

Versarien PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Versarien PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Air Products and Versarien PLC

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

The idea behind Air Products Chemicals and Versarien PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..