Correlation Between Air Products and HydroGraph Clean

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

Diversification Opportunities for Air Products and HydroGraph Clean

-0.42

Correlation Coefficient

Air Products  HydroGraph Clean

Very good diversification

The 3 months correlation between Air and HydroGraph is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and HydroGraph Clean Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HydroGraph Clean Power 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 HydroGraph Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HydroGraph Clean Power has no effect on the direction of Air Products i.e., Air Products and HydroGraph Clean go up and down completely randomly.

Pair Corralation between Air Products and HydroGraph Clean

Considering the 90-day investment horizon Air Products is expected to generate 1.3 times less return on investment than HydroGraph Clean. But when comparing it to its historical volatility, Air Products and is 4.49 times less risky than HydroGraph Clean. It trades about 0.21 of its potential returns per unit of risk. HydroGraph Clean Power is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9.30  in HydroGraph Clean Power on September 3, 2024 and sell it today you would earn a total of  0.70  from holding HydroGraph Clean Power or generate 7.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	56.25%
Values	Daily Returns

Air Products and  vs.  HydroGraph Clean Power

Air Products

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

HydroGraph Clean Power

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days HydroGraph Clean Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, HydroGraph Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Products and HydroGraph Clean

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

The idea behind Air Products and and HydroGraph Clean Power 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.