Correlation Between AIR LIQUIDE and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both AIR LIQUIDE and Sumitomo Chemical 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 Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR LIQUIDE ADR and Sumitomo Chemical, you can compare the effects of market volatilities on AIR LIQUIDE and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR LIQUIDE and Sumitomo Chemical.
Diversification Opportunities for AIR LIQUIDE and Sumitomo Chemical
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIR and Sumitomo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding AIR LIQUIDE ADR and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 ADR are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of AIR LIQUIDE i.e., AIR LIQUIDE and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between AIR LIQUIDE and Sumitomo Chemical
Assuming the 90 days trading horizon AIR LIQUIDE ADR is expected to under-perform the Sumitomo Chemical. But the stock apears to be less risky and, when comparing its historical volatility, AIR LIQUIDE ADR is 1.66 times less risky than Sumitomo Chemical. The stock trades about -0.51 of its potential returns per unit of risk. The Sumitomo Chemical is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest 232.00 in Sumitomo Chemical on September 1, 2024 and sell it today you would lose (16.00) from holding Sumitomo Chemical or give up 6.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR LIQUIDE ADR vs. Sumitomo Chemical
Performance |
| Timeline |
| AIR LIQUIDE ADR |
| Sumitomo Chemical |
AIR LIQUIDE and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR LIQUIDE and Sumitomo Chemical
The main advantage of trading using opposite AIR LIQUIDE and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR LIQUIDE position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.The idea behind AIR LIQUIDE ADR and Sumitomo Chemical 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.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |