Correlation Between Air Products and Trinseo SA

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

Diversification Opportunities for Air Products and Trinseo SA

0.07

Correlation Coefficient

Air Products  Trinseo SA

Significant diversification

The 3 months correlation between Air and Trinseo is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Trinseo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinseo SA 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 Trinseo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinseo SA has no effect on the direction of Air Products i.e., Air Products and Trinseo SA go up and down completely randomly.

Pair Corralation between Air Products and Trinseo SA

Considering the 90-day investment horizon Air Products is expected to generate 2.93 times less return on investment than Trinseo SA. But when comparing it to its historical volatility, Air Products and is 4.28 times less risky than Trinseo SA. It trades about 0.14 of its potential returns per unit of risk. Trinseo SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  338.00  in Trinseo SA on September 11, 2024 and sell it today you would earn a total of  108.00  from holding Trinseo SA or generate 31.95% return on investment over 90 days.

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

Air Products and  vs.  Trinseo SA

Air Products

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 11 (%) 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.

Trinseo SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trinseo SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Trinseo SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Products and Trinseo SA

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

The idea behind Air Products and and Trinseo SA 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.

Check out your portfolio center.

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.