Correlation Between Rightmove PLC and Air Products

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

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

Diversification Opportunities for Rightmove PLC and Air Products

-0.33

Correlation Coefficient

Rightmove PLC  Air Products

Very good diversification

The 3 months correlation between Rightmove and Air is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Rightmove PLC 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 Rightmove PLC 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 Rightmove PLC 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 Rightmove PLC i.e., Rightmove PLC and Air Products go up and down completely randomly.

Pair Corralation between Rightmove PLC and Air Products

Assuming the 90 days trading horizon Rightmove PLC is expected to generate 5.67 times less return on investment than Air Products. But when comparing it to its historical volatility, Rightmove PLC is 1.02 times less risky than Air Products. It trades about 0.02 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  28,373  in Air Products Chemicals on September 13, 2024 and sell it today you would earn a total of  2,845  from holding Air Products Chemicals or generate 10.03% return on investment over 90 days.

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

Rightmove PLC  vs.  Air Products Chemicals

Rightmove PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rightmove PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Rightmove PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Air Products Chemicals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Air Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rightmove PLC and Air Products

The main advantage of trading using opposite Rightmove PLC and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rightmove PLC 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 Rightmove PLC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.