Correlation Between Sabre Insurance and Air Products

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

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

Diversification Opportunities for Sabre Insurance and Air Products

-0.44

Correlation Coefficient

Sabre Insurance  Air Products

Very good diversification

The 3 months correlation between Sabre and Air is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group 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 Sabre Insurance 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 Sabre Insurance Group 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 Sabre Insurance i.e., Sabre Insurance and Air Products go up and down completely randomly.

Pair Corralation between Sabre Insurance and Air Products

Assuming the 90 days trading horizon Sabre Insurance Group is expected to generate 1.5 times more return on investment than Air Products. However, Sabre Insurance is 1.5 times more volatile than Air Products Chemicals. It trades about 0.01 of its potential returns per unit of risk. Air Products Chemicals is currently generating about -0.11 per unit of risk. If you would invest  14,080  in Sabre Insurance Group on October 8, 2024 and sell it today you would earn a total of  20.00  from holding Sabre Insurance Group or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Sabre Insurance Group  vs.  Air Products Chemicals

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sabre Insurance and Air Products

The main advantage of trading using opposite Sabre Insurance and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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 Sabre Insurance Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.