Correlation Between Amedeo Air and Air Products

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

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

Diversification Opportunities for Amedeo Air and Air Products

0.62

Correlation Coefficient

Amedeo Air  Air Products

Poor diversification

The 3 months correlation between Amedeo and Air is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amedeo Air Four 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 Amedeo Air 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 Amedeo Air Four 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 Amedeo Air i.e., Amedeo Air and Air Products go up and down completely randomly.

Pair Corralation between Amedeo Air and Air Products

Assuming the 90 days trading horizon Amedeo Air is expected to generate 1.87 times less return on investment than Air Products. But when comparing it to its historical volatility, Amedeo Air Four is 2.82 times less risky than Air Products. It trades about 0.27 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  27,575  in Air Products Chemicals on September 2, 2024 and sell it today you would earn a total of  5,654  from holding Air Products Chemicals or generate 20.5% return on investment over 90 days.

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

Amedeo Air Four  vs.  Air Products Chemicals

Amedeo Air Four

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amedeo Air Four are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Amedeo Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Air Products Chemicals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Air Products unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amedeo Air and Air Products

The main advantage of trading using opposite Amedeo Air and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amedeo Air 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 Amedeo Air Four 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.