Correlation Between Air Products and Yips Chemical

Can any of the company-specific risk be diversified away by investing in both Air Products and Yips Chemical 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 Yips Chemical 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 Yips Chemical Holdings, you can compare the effects of market volatilities on Air Products and Yips Chemical 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 Yips Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Yips Chemical.

Diversification Opportunities for Air Products and Yips Chemical

0.33

Correlation Coefficient

Air Products  Yips Chemical

Weak diversification

The 3 months correlation between Air and Yips is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Yips Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yips Chemical Holdings 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 Yips Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yips Chemical Holdings has no effect on the direction of Air Products i.e., Air Products and Yips Chemical go up and down completely randomly.

Pair Corralation between Air Products and Yips Chemical

Considering the 90-day investment horizon Air Products and is expected to generate 1.57 times more return on investment than Yips Chemical. However, Air Products is 1.57 times more volatile than Yips Chemical Holdings. It trades about 0.22 of its potential returns per unit of risk. Yips Chemical Holdings is currently generating about 0.13 per unit of risk. If you would invest  22,643  in Air Products and on February 19, 2024 and sell it today you would earn a total of  3,627  from holding Air Products and or generate 16.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Air Products and  vs.  Yips Chemical Holdings

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.

Yips Chemical Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yips Chemical Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Yips Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Products and Yips Chemical

The main advantage of trading using opposite Air Products and Yips Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Yips Chemical 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 Yips Chemical will offset losses from the drop in Yips Chemical's long position.

The idea behind Air Products and and Yips Chemical Holdings 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.