Correlation Between Air Products and DL Industries

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Can any of the company-specific risk be diversified away by investing in both Air Products and DL Industries 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 Air Products and DL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products And and DL Industries ADR, you can compare the effects of market volatilities on Air Products and DL Industries 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 Air Products with a short position of DL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and DL Industries.

Diversification Opportunities for Air Products and DL Industries

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Air and DLNDY is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Air Products And and DL Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DL Industries ADR and Air Products 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 Air Products And are associated (or correlated) with DL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DL Industries ADR has no effect on the direction of Air Products i.e., Air Products and DL Industries go up and down completely randomly.

Pair Corralation between Air Products and DL Industries

Considering the 90-day investment horizon Air Products And is expected to generate 0.48 times more return on investment than DL Industries. However, Air Products And is 2.08 times less risky than DL Industries. It trades about 0.18 of its potential returns per unit of risk. DL Industries ADR is currently generating about -0.18 per unit of risk. If you would invest  23,173  in Air Products And on December 29, 2023 and sell it today you would earn a total of  1,054  from holding Air Products And or generate 4.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Air Products And  vs.  DL Industries ADR

 Performance 
       Timeline  
Air Products And 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days Air Products And has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
DL Industries ADR 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days DL Industries ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Air Products and DL Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Air Products and DL Industries

The main advantage of trading using opposite Air Products and DL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, DL Industries 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 DL Industries will offset losses from the drop in DL Industries' long position.
The idea behind Air Products And and DL Industries ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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