Correlation Between AIR PRODCHEMICALS and GAMESTOP

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

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

Diversification Opportunities for AIR PRODCHEMICALS and GAMESTOP

0.35

Correlation Coefficient

AIR PRODCHEMICALS  GAMESTOP

Weak diversification

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

Pair Corralation between AIR PRODCHEMICALS and GAMESTOP

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 9.17 times less return on investment than GAMESTOP. But when comparing it to its historical volatility, AIR PRODCHEMICALS is 5.47 times less risky than GAMESTOP. It trades about 0.04 of its potential returns per unit of risk. GAMESTOP is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,433  in GAMESTOP on October 7, 2024 and sell it today you would earn a total of  1,602  from holding GAMESTOP or generate 111.79% return on investment over 90 days.

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

AIR PRODCHEMICALS  vs.  GAMESTOP

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.

GAMESTOP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GAMESTOP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIR PRODCHEMICALS and GAMESTOP

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

The idea behind AIR PRODCHEMICALS and GAMESTOP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.