Correlation Between Air Liquide and Dow
Can any of the company-specific risk be diversified away by investing in both Air Liquide and Dow 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 Dow 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 Dow Inc, you can compare the effects of market volatilities on Air Liquide and Dow 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 Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Dow.
Diversification Opportunities for Air Liquide and Dow
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Dow is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Inc has no effect on the direction of Air Liquide i.e., Air Liquide and Dow go up and down completely randomly.
Pair Corralation between Air Liquide and Dow
Assuming the 90 days horizon Air Liquide SA is expected to generate 0.77 times more return on investment than Dow. However, Air Liquide SA is 1.3 times less risky than Dow. It trades about 0.34 of its potential returns per unit of risk. Dow Inc is currently generating about 0.11 per unit of risk. If you would invest 15,580 in Air Liquide SA on November 1, 2024 and sell it today you would earn a total of 1,110 from holding Air Liquide SA or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Air Liquide SA vs. Dow Inc
Performance |
| Timeline |
| Air Liquide SA |
| Dow Inc |
Air Liquide and Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Liquide and Dow
The main advantage of trading using opposite Air Liquide and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide position performs unexpectedly, Dow 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 Dow will offset losses from the drop in Dow's long position.| Air Liquide vs. AIR LIQUIDE ADR | Air Liquide vs. Air Products and | Air Liquide vs. Shin Etsu Chemical Co | Air Liquide vs. BASF 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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