Correlation Between Boston Properties and Air Products

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

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

Diversification Opportunities for Boston Properties and Air Products

0.65

Correlation Coefficient

Boston Properties  Air Products

Poor diversification

The 3 months correlation between Boston and Air is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Boston Properties 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 Boston Properties 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 has no effect on the direction of Boston Properties i.e., Boston Properties and Air Products go up and down completely randomly.

Pair Corralation between Boston Properties and Air Products

Considering the 90-day investment horizon Boston Properties is expected to generate 2.39 times more return on investment than Air Products. However, Boston Properties is 2.39 times more volatile than Air Products and. It trades about -0.08 of its potential returns per unit of risk. Air Products and is currently generating about -0.63 per unit of risk. If you would invest  7,818  in Boston Properties on October 6, 2024 and sell it today you would lose (327.00) from holding Boston Properties or give up 4.18% of portfolio value over 90 days.

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

Boston Properties  vs.  Air Products and

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Boston Properties is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Boston Properties and Air Products

The main advantage of trading using opposite Boston Properties and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Properties 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 Boston Properties and Air Products and 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.