Correlation Between Weiss Korea and Air Products

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

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

Diversification Opportunities for Weiss Korea and Air Products

0.21

Correlation Coefficient

Weiss Korea  Air Products

Modest diversification

The 3 months correlation between Weiss and Air is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Weiss Korea Opportunity 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 Weiss Korea 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 Weiss Korea Opportunity 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 Weiss Korea i.e., Weiss Korea and Air Products go up and down completely randomly.

Pair Corralation between Weiss Korea and Air Products

Assuming the 90 days trading horizon Weiss Korea Opportunity is expected to generate 2.2 times more return on investment than Air Products. However, Weiss Korea is 2.2 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  15,900  in Weiss Korea Opportunity on October 6, 2024 and sell it today you would lose (151.00) from holding Weiss Korea Opportunity or give up 0.95% of portfolio value over 90 days.

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

Weiss Korea Opportunity  vs.  Air Products Chemicals

Weiss Korea Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weiss Korea Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Weiss Korea 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 Weiss Korea and Air Products

The main advantage of trading using opposite Weiss Korea and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weiss Korea 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 Weiss Korea Opportunity 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.