Correlation Between AIR PRODCHEMICALS and AutoZone

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

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

Diversification Opportunities for AIR PRODCHEMICALS and AutoZone

-0.15

Correlation Coefficient

AIR PRODCHEMICALS  AutoZone

Good diversification

The 3 months correlation between AIR and AutoZone is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and AutoZone go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and AutoZone

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to under-perform the AutoZone. But the stock apears to be less risky and, when comparing its historical volatility, AIR PRODCHEMICALS is 1.02 times less risky than AutoZone. The stock trades about -0.1 of its potential returns per unit of risk. The AutoZone is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  300,100  in AutoZone on October 7, 2024 and sell it today you would earn a total of  14,700  from holding AutoZone or generate 4.9% return on investment over 90 days.

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

AIR PRODCHEMICALS  vs.  AutoZone

AIR PRODCHEMICALS

Risk-Adjusted Performance

0 of 100

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.

AutoZone

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AutoZone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIR PRODCHEMICALS and AutoZone

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

The idea behind AIR PRODCHEMICALS and AutoZone 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.