Correlation Between Air Liquide and Thales SA
Can any of the company-specific risk be diversified away by investing in both Air Liquide and Thales SA 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 Liquide and Thales SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Liquide SA and Thales SA, you can compare the effects of market volatilities on Air Liquide and Thales SA 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 Liquide with a short position of Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Thales SA.
Diversification Opportunities for Air Liquide and Thales SA
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and Thales is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA and Air Liquide 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 Liquide SA are associated (or correlated) with Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Air Liquide i.e., Air Liquide and Thales SA go up and down completely randomly.
Pair Corralation between Air Liquide and Thales SA
Assuming the 90 days horizon Air Liquide SA is expected to generate 0.75 times more return on investment than Thales SA. However, Air Liquide SA is 1.33 times less risky than Thales SA. It trades about 0.05 of its potential returns per unit of risk. Thales SA is currently generating about 0.04 per unit of risk. If you would invest 12,304 in Air Liquide SA on August 24, 2024 and sell it today you would earn a total of 3,720 from holding Air Liquide SA or generate 30.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Liquide SA vs. Thales SA
Performance |
| Timeline |
| Air Liquide SA |
| Thales SA |
Air Liquide and Thales SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Liquide and Thales SA
The main advantage of trading using opposite Air Liquide and Thales SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide position performs unexpectedly, Thales SA 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 Thales SA will offset losses from the drop in Thales SA's long position.| Air Liquide vs. Sanofi SA | Air Liquide vs. LOreal SA | Air Liquide vs. Vinci SA | Air Liquide vs. Schneider Electric SE |
| Thales SA vs. Safran SA | Thales SA vs. Dassault Systemes SE | Thales SA vs. Dassault Aviation SA | Thales SA vs. Vinci SA |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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