Correlation Between LAir Liquide and CSL
Can any of the company-specific risk be diversified away by investing in both LAir Liquide and CSL 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 CSL 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 CSL Limited, you can compare the effects of market volatilities on LAir Liquide and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and CSL.
Diversification Opportunities for LAir Liquide and CSL
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LAir and CSL is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of LAir Liquide i.e., LAir Liquide and CSL go up and down completely randomly.
Pair Corralation between LAir Liquide and CSL
Assuming the 90 days horizon LAir Liquide SA is expected to generate 0.6 times more return on investment than CSL. However, LAir Liquide SA is 1.66 times less risky than CSL. It trades about 0.05 of its potential returns per unit of risk. CSL Limited is currently generating about 0.0 per unit of risk. If you would invest 12,515 in LAir Liquide SA on September 2, 2024 and sell it today you would earn a total of 3,819 from holding LAir Liquide SA or generate 30.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 93.15% |
| Values | Daily Returns |
LAir Liquide SA vs. CSL Limited
Performance |
| Timeline |
| LAir Liquide SA |
| CSL Limited |
LAir Liquide and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAir Liquide and CSL
The main advantage of trading using opposite LAir Liquide and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| LAir Liquide vs. Sherwin Williams Co | LAir Liquide vs. Air Liquide SA | LAir Liquide vs. Air Products and | LAir Liquide vs. Ecolab Inc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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