Correlation Between AIR PRODCHEMICALS and LIFENET INSURANCE

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

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

Diversification Opportunities for AIR PRODCHEMICALS and LIFENET INSURANCE

0.63

Correlation Coefficient

AIR PRODCHEMICALS  LIFENET INSURANCE

Poor diversification

The 3 months correlation between AIR and LIFENET is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE and AIR PRODCHEMICALS 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 PRODCHEMICALS are associated (or correlated) with LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and LIFENET INSURANCE go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and LIFENET INSURANCE

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to under-perform the LIFENET INSURANCE. But the stock apears to be less risky and, when comparing its historical volatility, AIR PRODCHEMICALS is 1.19 times less risky than LIFENET INSURANCE. The stock trades about -0.05 of its potential returns per unit of risk. The LIFENET INSURANCE CO is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,090  in LIFENET INSURANCE CO on December 20, 2024 and sell it today you would lose (50.00) from holding LIFENET INSURANCE CO or give up 4.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

AIR PRODCHEMICALS  vs.  LIFENET INSURANCE CO

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.

LIFENET INSURANCE

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFENET INSURANCE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LIFENET INSURANCE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AIR PRODCHEMICALS and LIFENET INSURANCE

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

The idea behind AIR PRODCHEMICALS and LIFENET INSURANCE CO 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.