Correlation Between ABBVIE and Air Products

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

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

Diversification Opportunities for ABBVIE and Air Products

-0.8

Correlation Coefficient

ABBVIE  Air Products

Pay attention - limited upside

The 3 months correlation between ABBVIE and Air is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ABBVIE INC and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and ABBVIE 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 ABBVIE INC 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 ABBVIE i.e., ABBVIE and Air Products go up and down completely randomly.

Pair Corralation between ABBVIE and Air Products

Assuming the 90 days trading horizon ABBVIE INC is expected to under-perform the Air Products. But the bond apears to be less risky and, when comparing its historical volatility, ABBVIE INC is 1.35 times less risky than Air Products. The bond trades about -0.16 of its potential returns per unit of risk. The Air Products and is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  27,192  in Air Products and on September 5, 2024 and sell it today you would earn a total of  5,872  from holding Air Products and or generate 21.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

ABBVIE INC  vs.  Air Products and

ABBVIE INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABBVIE INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ABBVIE INC investors.

Air Products

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABBVIE and Air Products

The main advantage of trading using opposite ABBVIE and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABBVIE 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 ABBVIE INC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.