Correlation Between Air Products and Foremost Lithium

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

Diversification Opportunities for Air Products and Foremost Lithium

0.45

Correlation Coefficient

Air Products  Foremost Lithium

Very weak diversification

The 3 months correlation between Air and Foremost is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource 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 Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of Air Products i.e., Air Products and Foremost Lithium go up and down completely randomly.

Pair Corralation between Air Products and Foremost Lithium

Considering the 90-day investment horizon Air Products is expected to generate 3.77 times less return on investment than Foremost Lithium. But when comparing it to its historical volatility, Air Products and is 10.97 times less risky than Foremost Lithium. It trades about 0.35 of its potential returns per unit of risk. Foremost Lithium Resource is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Foremost Lithium Resource on October 22, 2024 and sell it today you would earn a total of  21.00  from holding Foremost Lithium Resource or generate 17.65% return on investment over 90 days.

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

Air Products and  vs.  Foremost Lithium Resource

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. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Foremost Lithium Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foremost Lithium Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Air Products and Foremost Lithium

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

The idea behind Air Products and and Foremost Lithium Resource 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.