Correlation Between Launch One and Air Products

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

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

Diversification Opportunities for Launch One and Air Products

-0.29

Correlation Coefficient

Launch One  Air Products

Very good diversification

The 3 months correlation between Launch and Air is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Launch One Acquisition and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Launch One 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 Launch One Acquisition 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 Launch One i.e., Launch One and Air Products go up and down completely randomly.

Pair Corralation between Launch One and Air Products

Given the investment horizon of 90 days Launch One is expected to generate 6.81 times less return on investment than Air Products. But when comparing it to its historical volatility, Launch One Acquisition is 23.72 times less risky than Air Products. It trades about 0.11 of its potential returns per unit of risk. Air Products and is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  25,773  in Air Products and on October 7, 2024 and sell it today you would earn a total of  2,618  from holding Air Products and or generate 10.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	35.08%
Values	Daily Returns

Launch One Acquisition  vs.  Air Products and

Launch One Acquisition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Launch One is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Launch One and Air Products

The main advantage of trading using opposite Launch One and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Launch One 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 Launch One Acquisition 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.