Correlation Between Sociedad Química and Air Products

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

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

Diversification Opportunities for Sociedad Química and Air Products

-0.25

Correlation Coefficient

Sociedad Química  Air Products

Very good diversification

The 3 months correlation between Sociedad and Air is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sociedad Qumica y and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Sociedad Química 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 Sociedad Qumica y 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 Sociedad Química i.e., Sociedad Química and Air Products go up and down completely randomly.

Pair Corralation between Sociedad Química and Air Products

Assuming the 90 days horizon Sociedad Qumica y is expected to generate 1.3 times more return on investment than Air Products. However, Sociedad Química is 1.3 times more volatile than Air Products and. It trades about 0.06 of its potential returns per unit of risk. Air Products and is currently generating about -0.01 per unit of risk. If you would invest  3,570  in Sociedad Qumica y on December 29, 2024 and sell it today you would earn a total of  270.00  from holding Sociedad Qumica y or generate 7.56% return on investment over 90 days.

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

Sociedad Qumica y  vs.  Air Products and

Sociedad Qumica y

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Qumica y are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sociedad Química may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Air Products

Risk-Adjusted Performance

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 Sociedad Química and Air Products

The main advantage of trading using opposite Sociedad Química and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sociedad Química 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 Sociedad Qumica y 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.