Correlation Between FC Investment and Air Products

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

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

Diversification Opportunities for FC Investment and Air Products

0.48

Correlation Coefficient

FC Investment  Air Products

Very weak diversification

The 3 months correlation between FCIT and Air is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment 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 FC Investment 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 FC Investment 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 FC Investment i.e., FC Investment and Air Products go up and down completely randomly.

Pair Corralation between FC Investment and Air Products

Assuming the 90 days trading horizon FC Investment is expected to generate 2.52 times less return on investment than Air Products. But when comparing it to its historical volatility, FC Investment Trust is 5.97 times less risky than Air Products. It trades about 0.05 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  29,283  in Air Products Chemicals on September 24, 2024 and sell it today you would earn a total of  37.00  from holding Air Products Chemicals or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

FC Investment Trust  vs.  Air Products Chemicals

FC Investment Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FC Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Air Products Chemicals

Risk-Adjusted Performance

0 of 100

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FC Investment and Air Products

The main advantage of trading using opposite FC Investment and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FC Investment 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 FC Investment 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 Transaction History module to view history of all your transactions and understand their impact on performance.