Correlation Between Fair Isaac and Air Products

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

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

Diversification Opportunities for Fair Isaac and Air Products

0.69

Correlation Coefficient

Fair Isaac  Air Products

Poor diversification

The 3 months correlation between Fair and Air is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Fair Isaac 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 Fair Isaac 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 Fair Isaac i.e., Fair Isaac and Air Products go up and down completely randomly.

Pair Corralation between Fair Isaac and Air Products

Assuming the 90 days trading horizon Fair Isaac is expected to generate 1.19 times more return on investment than Air Products. However, Fair Isaac is 1.19 times more volatile than Air Products and. It trades about 0.01 of its potential returns per unit of risk. Air Products and is currently generating about 0.0 per unit of risk. If you would invest  27,136  in Fair Isaac on October 8, 2024 and sell it today you would lose (36.00) from holding Fair Isaac or give up 0.13% of portfolio value over 90 days.

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

Fair Isaac  vs.  Air Products and

Fair Isaac

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Fair Isaac may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Air Products

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air Products sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fair Isaac and Air Products

The main advantage of trading using opposite Fair Isaac and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Isaac 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 Fair Isaac 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.