Correlation Between Air Liquide and Ecolab
Can any of the company-specific risk be diversified away by investing in both Air Liquide and Ecolab 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 Ecolab 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 Ecolab Inc, you can compare the effects of market volatilities on Air Liquide and Ecolab 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 Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Ecolab.
Diversification Opportunities for Air Liquide and Ecolab
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and Ecolab is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Air Liquide i.e., Air Liquide and Ecolab go up and down completely randomly.
Pair Corralation between Air Liquide and Ecolab
Assuming the 90 days trading horizon Air Liquide is expected to generate 2.65 times less return on investment than Ecolab. But when comparing it to its historical volatility, Air Liquide SA is 1.17 times less risky than Ecolab. It trades about 0.04 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 16,494 in Ecolab Inc on August 26, 2024 and sell it today you would earn a total of 6,476 from holding Ecolab Inc or generate 39.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.7% |
| Values | Daily Returns |
Air Liquide SA vs. Ecolab Inc
Performance |
| Timeline |
| Air Liquide SA |
| Ecolab Inc |
Air Liquide and Ecolab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Liquide and Ecolab
The main advantage of trading using opposite Air Liquide and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide position performs unexpectedly, Ecolab 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 Ecolab will offset losses from the drop in Ecolab's long position.| Air Liquide vs. The Yokohama Rubber | Air Liquide vs. Reinsurance Group of | Air Liquide vs. MSAD INSURANCE | Air Liquide vs. Materialise NV |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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