Correlation Between Grand Canyon and Air Products

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

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

Diversification Opportunities for Grand Canyon and Air Products

0.32

Correlation Coefficient

Grand Canyon  Air Products

Weak diversification

The 3 months correlation between Grand and Air is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and Air Products go up and down completely randomly.

Pair Corralation between Grand Canyon and Air Products

Assuming the 90 days trading horizon Grand Canyon Education is expected to generate 1.09 times more return on investment than Air Products. However, Grand Canyon is 1.09 times more volatile than Air Products and. It trades about 0.09 of its potential returns per unit of risk. Air Products and is currently generating about 0.08 per unit of risk. If you would invest  12,800  in Grand Canyon Education on October 8, 2024 and sell it today you would earn a total of  3,000  from holding Grand Canyon Education or generate 23.44% return on investment over 90 days.

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

Grand Canyon Education  vs.  Air Products and

Grand Canyon Education

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable basic indicators, Air Products is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Grand Canyon and Air Products

The main advantage of trading using opposite Grand Canyon and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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 Grand Canyon Education 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.