Correlation Between Air Products and Weiss Korea

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

Diversification Opportunities for Air Products and Weiss Korea

0.5

Correlation Coefficient

Air Products  Weiss Korea

Very weak diversification

The 3 months correlation between Air and Weiss is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Weiss Korea Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weiss Korea Opportunity 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 Weiss Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weiss Korea Opportunity has no effect on the direction of Air Products i.e., Air Products and Weiss Korea go up and down completely randomly.

Pair Corralation between Air Products and Weiss Korea

Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 3.83 times more return on investment than Weiss Korea. However, Air Products is 3.83 times more volatile than Weiss Korea Opportunity. It trades about 0.04 of its potential returns per unit of risk. Weiss Korea Opportunity is currently generating about 0.02 per unit of risk. If you would invest  26,135  in Air Products Chemicals on October 21, 2024 and sell it today you would earn a total of  5,265  from holding Air Products Chemicals or generate 20.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.66%
Values	Daily Returns

Air Products Chemicals  vs.  Weiss Korea Opportunity

Air Products Chemicals

Risk-Adjusted Performance

0 of 100

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.

Weiss Korea Opportunity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weiss Korea Opportunity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Weiss Korea is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Air Products and Weiss Korea

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

The idea behind Air Products Chemicals and Weiss Korea Opportunity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.