Correlation Between Dow and Air Products

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

Diversification Opportunities for Dow and Air Products

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Dow and Air Products is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc 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 Dow 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 Dow Inc 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 Dow i.e., Dow and Air Products go up and down completely randomly.

Pair Corralation between Dow and Air Products

Considering the 90-day investment horizon Dow Inc is expected to under-perform the Air Products. In addition to that, Dow is 1.15 times more volatile than Air Products And. It trades about -0.31 of its total potential returns per unit of risk. Air Products And is currently generating about -0.21 per unit of volatility. If you would invest  25,000  in Air Products And on July 3, 2022 and sell it today you would lose (1,727)  from holding Air Products And or give up 6.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

Dow Inc  vs.  Air Products And

 Performance (%) 
       Timeline  
Dow Inc 
Dow Performance
0 of 100
Over the last 90 days Dow Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in November 2022. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Dow Price Channel

Air Products And 
Air Products Performance
0 of 100
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 rather sound basic indicators, Air Products is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Air Products Price Channel

Dow and Air Products Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dow and Air Products

The main advantage of trading using opposite Dow and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 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.
Dow vs. International Business Machines
The idea behind Dow Inc 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.
Air Products vs. Amazon Inc
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 Fund Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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