Correlation Between LAir Liquide and Cabot
Can any of the company-specific risk be diversified away by investing in both LAir Liquide and Cabot 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 LAir Liquide and Cabot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAir Liquide SA and Cabot, you can compare the effects of market volatilities on LAir Liquide and Cabot 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 LAir Liquide with a short position of Cabot. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and Cabot.
Diversification Opportunities for LAir Liquide and Cabot
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between LAir and Cabot is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot and LAir 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 LAir Liquide SA are associated (or correlated) with Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of LAir Liquide i.e., LAir Liquide and Cabot go up and down completely randomly.
Pair Corralation between LAir Liquide and Cabot
Assuming the 90 days horizon LAir Liquide SA is expected to generate 0.67 times more return on investment than Cabot. However, LAir Liquide SA is 1.5 times less risky than Cabot. It trades about -0.04 of its potential returns per unit of risk. Cabot is currently generating about -0.19 per unit of risk. If you would invest 16,969 in LAir Liquide SA on September 13, 2024 and sell it today you would lose (205.00) from holding LAir Liquide SA or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAir Liquide SA vs. Cabot
Performance |
| Timeline |
| LAir Liquide SA |
| Cabot |
LAir Liquide and Cabot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAir Liquide and Cabot
The main advantage of trading using opposite LAir Liquide and Cabot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide position performs unexpectedly, Cabot 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 Cabot will offset losses from the drop in Cabot's long position.| LAir Liquide vs. Asia Carbon Industries | LAir Liquide vs. Akzo Nobel NV | LAir Liquide vs. Avoca LLC | LAir Liquide vs. AGC Inc ADR |
| Cabot vs. Perimeter Solutions SA | Cabot vs. Kronos Worldwide | Cabot vs. Sensient Technologies | Cabot vs. Element Solutions |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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