Correlation Between Allianz Technology and Air Products

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

By analyzing existing cross correlation between Allianz Technology Trust and Air Products Chemicals, you can compare the effects of market volatilities on Allianz Technology and Air Products 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 Allianz Technology with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allianz Technology and Air Products.

Diversification Opportunities for Allianz Technology and Air Products

0.1

Correlation Coefficient

Allianz Technology  Air Products

Average diversification

The 3 months correlation between Allianz and Air is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Allianz Technology Trust and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and Allianz Technology 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 Allianz Technology Trust are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Allianz Technology i.e., Allianz Technology and Air Products go up and down completely randomly.

Pair Corralation between Allianz Technology and Air Products

Assuming the 90 days trading horizon Allianz Technology Trust is expected to generate 1.12 times more return on investment than Air Products. However, Allianz Technology is 1.12 times more volatile than Air Products Chemicals. It trades about -0.02 of its potential returns per unit of risk. Air Products Chemicals is currently generating about -0.03 per unit of risk. If you would invest  41,550  in Allianz Technology Trust on December 4, 2024 and sell it today you would lose (1,300) from holding Allianz Technology Trust or give up 3.13% of portfolio value over 90 days.

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

Allianz Technology Trust  vs.  Air Products Chemicals

Allianz Technology Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allianz Technology Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Allianz Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Air Products Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Products Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Air Products is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Allianz Technology and Air Products

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

The idea behind Allianz Technology Trust and Air Products Chemicals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.