Correlation Between WPLAU and Air Products

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

By analyzing existing cross correlation between WPLAU 365 05 MAR 25 and Air Products and, you can compare the effects of market volatilities on WPLAU 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 WPLAU with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPLAU and Air Products.

Diversification Opportunities for WPLAU and Air Products

0.52

Correlation Coefficient

WPLAU  Air Products

Very weak diversification

The 3 months correlation between WPLAU and Air is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding WPLAU 365 05 MAR 25 and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and WPLAU 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 WPLAU 365 05 MAR 25 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 WPLAU i.e., WPLAU and Air Products go up and down completely randomly.

Pair Corralation between WPLAU and Air Products

Assuming the 90 days trading horizon WPLAU 365 05 MAR 25 is expected to generate 0.14 times more return on investment than Air Products. However, WPLAU 365 05 MAR 25 is 7.08 times less risky than Air Products. It trades about 0.08 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  9,671  in WPLAU 365 05 MAR 25 on September 23, 2024 and sell it today you would earn a total of  297.00  from holding WPLAU 365 05 MAR 25 or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.78%
Values	Daily Returns

WPLAU 365 05 MAR 25  vs.  Air Products and

WPLAU 365 05

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WPLAU 365 05 MAR 25 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, WPLAU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Air Products

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with WPLAU and Air Products

The main advantage of trading using opposite WPLAU and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPLAU 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 WPLAU 365 05 MAR 25 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.