Correlation Between Big Yellow and AIR PRODCHEMICALS

Can any of the company-specific risk be diversified away by investing in both Big Yellow and AIR PRODCHEMICALS 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 Big Yellow and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Yellow Group and AIR PRODCHEMICALS, you can compare the effects of market volatilities on Big Yellow and AIR PRODCHEMICALS 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 Big Yellow with a short position of AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Yellow and AIR PRODCHEMICALS.

Diversification Opportunities for Big Yellow and AIR PRODCHEMICALS

-0.52

Correlation Coefficient

Big Yellow  AIR PRODCHEMICALS

Excellent diversification

The 3 months correlation between Big and AIR is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Big Yellow Group and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and Big Yellow 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 Big Yellow Group are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of Big Yellow i.e., Big Yellow and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between Big Yellow and AIR PRODCHEMICALS

Assuming the 90 days horizon Big Yellow Group is expected to generate 1.05 times more return on investment than AIR PRODCHEMICALS. However, Big Yellow is 1.05 times more volatile than AIR PRODCHEMICALS. It trades about -0.02 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about -0.02 per unit of risk. If you would invest  2,920  in Big Yellow Group on October 5, 2024 and sell it today you would lose (41.00) from holding Big Yellow Group or give up 1.4% of portfolio value over 90 days.

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

Big Yellow Group  vs.  AIR PRODCHEMICALS

Big Yellow Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Yellow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big Yellow is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AIR PRODCHEMICALS

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS 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 Big Yellow and AIR PRODCHEMICALS

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

The idea behind Big Yellow Group and AIR PRODCHEMICALS 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.