Correlation Between Air Liquide and Nexans SA
Can any of the company-specific risk be diversified away by investing in both Air Liquide and Nexans 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 Nexans 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 Nexans SA, you can compare the effects of market volatilities on Air Liquide and Nexans 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 Nexans SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Nexans SA.
Diversification Opportunities for Air Liquide and Nexans SA
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and Nexans is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Nexans SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexans 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 Nexans SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexans SA has no effect on the direction of Air Liquide i.e., Air Liquide and Nexans SA go up and down completely randomly.
Pair Corralation between Air Liquide and Nexans SA
Assuming the 90 days horizon Air Liquide is expected to generate 1.32 times less return on investment than Nexans SA. But when comparing it to its historical volatility, Air Liquide SA is 2.01 times less risky than Nexans SA. It trades about 0.05 of its potential returns per unit of risk. Nexans SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 8,282 in Nexans SA on September 3, 2024 and sell it today you would earn a total of 2,458 from holding Nexans SA or generate 29.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Liquide SA vs. Nexans SA
Performance |
| Timeline |
| Air Liquide SA |
| Nexans SA |
Air Liquide and Nexans SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Liquide and Nexans SA
The main advantage of trading using opposite Air Liquide and Nexans SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide position performs unexpectedly, Nexans 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 Nexans SA will offset losses from the drop in Nexans 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 |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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