Correlation Between Air Products and Karsten SA

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

By analyzing existing cross correlation between Air Products and and Karsten SA, you can compare the effects of market volatilities on Air Products and Karsten SA 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 Karsten SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Karsten SA.

Diversification Opportunities for Air Products and Karsten SA

0.25

Correlation Coefficient

Air Products  Karsten SA

Modest diversification

The 3 months correlation between Air and Karsten is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Karsten SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karsten SA 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 and are associated (or correlated) with Karsten SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karsten SA has no effect on the direction of Air Products i.e., Air Products and Karsten SA go up and down completely randomly.

Pair Corralation between Air Products and Karsten SA

Assuming the 90 days trading horizon Air Products and is expected to generate 0.08 times more return on investment than Karsten SA. However, Air Products and is 12.17 times less risky than Karsten SA. It trades about 0.3 of its potential returns per unit of risk. Karsten SA is currently generating about 0.01 per unit of risk. If you would invest  44,670  in Air Products and on October 22, 2024 and sell it today you would earn a total of  1,230  from holding Air Products and or generate 2.75% return on investment over 90 days.

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

Air Products and  vs.  Karsten SA

Air Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Products and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Air Products is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Karsten SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Karsten SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Karsten SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Air Products and Karsten SA

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

The idea behind Air Products and and Karsten SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.