Correlation Between Cabot and Air Products

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

Diversification Opportunities for Cabot and Air Products

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Cabot and Air is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Air Products And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products And and Cabot 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 Cabot 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 And has no effect on the direction of Cabot i.e., Cabot and Air Products go up and down completely randomly.

Pair Corralation between Cabot and Air Products

Considering the 90-day investment horizon Cabot is expected to generate 1.06 times more return on investment than Air Products. However, Cabot is 1.06 times more volatile than Air Products And. It trades about 0.07 of its potential returns per unit of risk. Air Products And is currently generating about -0.03 per unit of risk. If you would invest  6,397  in Cabot on December 29, 2023 and sell it today you would earn a total of  2,788  from holding Cabot or generate 43.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Cabot  vs.  Air Products And

 Performance 
       Timeline  
Cabot 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, Cabot may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Air Products And 

Risk-Adjusted Performance

0 of 100

 
Low
 
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.

Cabot and Air Products Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cabot and Air Products

The main advantage of trading using opposite Cabot and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot 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 Cabot 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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