Correlation Between Air Liquide and Evonik Industries
Can any of the company-specific risk be diversified away by investing in both Air Liquide and Evonik Industries 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 Evonik Industries 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 Evonik Industries AG, you can compare the effects of market volatilities on Air Liquide and Evonik Industries 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 Evonik Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Evonik Industries.
Diversification Opportunities for Air Liquide and Evonik Industries
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Evonik is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Evonik Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evonik Industries 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 Evonik Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evonik Industries has no effect on the direction of Air Liquide i.e., Air Liquide and Evonik Industries go up and down completely randomly.
Pair Corralation between Air Liquide and Evonik Industries
Assuming the 90 days trading horizon Air Liquide is expected to generate 1.72 times less return on investment than Evonik Industries. But when comparing it to its historical volatility, Air Liquide SA is 1.45 times less risky than Evonik Industries. It trades about 0.25 of its potential returns per unit of risk. Evonik Industries AG is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,647 in Evonik Industries AG on October 24, 2024 and sell it today you would earn a total of 125.00 from holding Evonik Industries AG or generate 7.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Air Liquide SA vs. Evonik Industries AG
Performance |
Timeline |
Air Liquide SA |
Evonik Industries |
Air Liquide and Evonik Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Air Liquide and Evonik Industries
The main advantage of trading using opposite Air Liquide and Evonik Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide position performs unexpectedly, Evonik Industries 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 Evonik Industries will offset losses from the drop in Evonik Industries' long position.Air Liquide vs. Corsair Gaming | Air Liquide vs. Commercial Vehicle Group | Air Liquide vs. GigaMedia | Air Liquide vs. Games Workshop Group |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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