Correlation Between Air Products and NextTrip

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

Diversification Opportunities for Air Products and NextTrip

0.23

Correlation Coefficient

Air Products  NextTrip

Modest diversification

The 3 months correlation between Air and NextTrip is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and NextTrip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextTrip 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 NextTrip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextTrip has no effect on the direction of Air Products i.e., Air Products and NextTrip go up and down completely randomly.

Pair Corralation between Air Products and NextTrip

Considering the 90-day investment horizon Air Products is expected to generate 2.93 times less return on investment than NextTrip. But when comparing it to its historical volatility, Air Products and is 5.22 times less risky than NextTrip. It trades about 0.04 of its potential returns per unit of risk. NextTrip is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  632.00  in NextTrip on December 28, 2024 and sell it today you would lose (48.00) from holding NextTrip or give up 7.59% of portfolio value over 90 days.

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

Air Products and  vs.  NextTrip

Air Products

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

NextTrip

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NextTrip are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, NextTrip may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Air Products and NextTrip

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

The idea behind Air Products and and NextTrip 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.