Correlation Between Air Liquide and Evonik Industries

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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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Air Liquide SA  vs.  Evonik Industries AG

 Performance 
       Timeline  
Air Liquide SA 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Air Liquide is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Evonik Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Evonik Industries AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.
The idea behind Air Liquide SA and Evonik Industries AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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