Correlation Between KRISPY KREME and AIR PRODCHEMICALS

Can any of the company-specific risk be diversified away by investing in both KRISPY KREME and AIR PRODCHEMICALS 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 KRISPY KREME and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KRISPY KREME DL 01 and AIR PRODCHEMICALS, you can compare the effects of market volatilities on KRISPY KREME and AIR PRODCHEMICALS 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 KRISPY KREME with a short position of AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRISPY KREME and AIR PRODCHEMICALS.

Diversification Opportunities for KRISPY KREME and AIR PRODCHEMICALS

0.02

Correlation Coefficient

KRISPY KREME  AIR PRODCHEMICALS

Significant diversification

The 3 months correlation between KRISPY and AIR is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding KRISPY KREME DL 01 and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and KRISPY KREME 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 KRISPY KREME DL 01 are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of KRISPY KREME i.e., KRISPY KREME and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between KRISPY KREME and AIR PRODCHEMICALS

Assuming the 90 days horizon KRISPY KREME DL 01 is expected to under-perform the AIR PRODCHEMICALS. In addition to that, KRISPY KREME is 4.26 times more volatile than AIR PRODCHEMICALS. It trades about -0.21 of its total potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about -0.11 per unit of volatility. If you would invest  31,410  in AIR PRODCHEMICALS on December 1, 2024 and sell it today you would lose (1,370) from holding AIR PRODCHEMICALS or give up 4.36% of portfolio value over 90 days.

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

KRISPY KREME DL 01  vs.  AIR PRODCHEMICALS

KRISPY KREME DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AIR PRODCHEMICALS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with KRISPY KREME and AIR PRODCHEMICALS

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

The idea behind KRISPY KREME DL 01 and AIR PRODCHEMICALS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.