Correlation Between Canlan Ice and Air Products

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Can any of the company-specific risk be diversified away by investing in both Canlan Ice 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 Canlan Ice and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canlan Ice Sports and Air Products and, you can compare the effects of market volatilities on Canlan Ice 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 Canlan Ice with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canlan Ice and Air Products.

Diversification Opportunities for Canlan Ice and Air Products

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Canlan and Air is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Canlan Ice 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 Canlan Ice Sports 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 Canlan Ice i.e., Canlan Ice and Air Products go up and down completely randomly.

Pair Corralation between Canlan Ice and Air Products

Assuming the 90 days horizon Canlan Ice is expected to generate 9.11 times less return on investment than Air Products. But when comparing it to its historical volatility, Canlan Ice Sports is 5.79 times less risky than Air Products. It trades about 0.22 of its potential returns per unit of risk. Air Products and is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  29,138  in Air Products and on October 20, 2024 and sell it today you would earn a total of  2,642  from holding Air Products and or generate 9.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Canlan Ice Sports  vs.  Air Products and

 Performance 
       Timeline  
Canlan Ice Sports 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
Air Products 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 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.

Canlan Ice and Air Products Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canlan Ice and Air Products

The main advantage of trading using opposite Canlan Ice and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canlan Ice 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 Canlan Ice Sports 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.
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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