Correlation Between Air Products and Minerals Technologies

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

Diversification Opportunities for Air Products and Minerals Technologies

0.35

Correlation Coefficient

Air Products  Minerals Technologies

Weak diversification

The 3 months correlation between Air and Minerals is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Air Products i.e., Air Products and Minerals Technologies go up and down completely randomly.

Pair Corralation between Air Products and Minerals Technologies

Assuming the 90 days horizon Air Products and is expected to under-perform the Minerals Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Air Products and is 1.18 times less risky than Minerals Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The Minerals Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,950  in Minerals Technologies on October 6, 2024 and sell it today you would earn a total of  300.00  from holding Minerals Technologies or generate 4.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Air Products and  vs.  Minerals Technologies

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 nearly stable basic indicators, Air Products is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Minerals Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Minerals Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Air Products and Minerals Technologies

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

The idea behind Air Products and and Minerals Technologies 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..