Correlation Between United States and Air Products

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

By analyzing existing cross correlation between United States Steel and Air Products Chemicals, you can compare the effects of market volatilities on United States and Air Products 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 United States with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Air Products.

Diversification Opportunities for United States and Air Products

0.16

Correlation Coefficient

United States  Air Products

Average diversification

The 3 months correlation between United and Air is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and United States 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 United States Steel are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of United States i.e., United States and Air Products go up and down completely randomly.

Pair Corralation between United States and Air Products

Assuming the 90 days trading horizon United States Steel is expected to generate 1.76 times more return on investment than Air Products. However, United States is 1.76 times more volatile than Air Products Chemicals. It trades about 0.2 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.02 per unit of risk. If you would invest  3,130  in United States Steel on December 30, 2024 and sell it today you would earn a total of  1,138  from holding United States Steel or generate 36.36% return on investment over 90 days.

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

United States Steel  vs.  Air Products Chemicals

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, United States unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with United States and Air Products

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

The idea behind United States Steel and Air Products Chemicals 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.