Correlation Between LAir Liquide and IMCD NV
Can any of the company-specific risk be diversified away by investing in both LAir Liquide and IMCD NV 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 IMCD NV 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 IMCD NV, you can compare the effects of market volatilities on LAir Liquide and IMCD NV 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 IMCD NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and IMCD NV.
Diversification Opportunities for LAir Liquide and IMCD NV
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LAir and IMCD is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and IMCD NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMCD NV 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 IMCD NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMCD NV has no effect on the direction of LAir Liquide i.e., LAir Liquide and IMCD NV go up and down completely randomly.
Pair Corralation between LAir Liquide and IMCD NV
Assuming the 90 days horizon LAir Liquide SA is expected to generate 0.71 times more return on investment than IMCD NV. However, LAir Liquide SA is 1.41 times less risky than IMCD NV. It trades about -0.06 of its potential returns per unit of risk. IMCD NV is currently generating about -0.08 per unit of risk. If you would invest 16,925 in LAir Liquide SA on September 19, 2024 and sell it today you would lose (243.00) from holding LAir Liquide SA or give up 1.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAir Liquide SA vs. IMCD NV
Performance |
| Timeline |
| LAir Liquide SA |
| IMCD NV |
LAir Liquide and IMCD NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAir Liquide and IMCD NV
The main advantage of trading using opposite LAir Liquide and IMCD NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide position performs unexpectedly, IMCD NV 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 IMCD NV will offset losses from the drop in IMCD NV's long position.| LAir Liquide vs. Chemours Co | LAir Liquide vs. International Flavors Fragrances | LAir Liquide vs. Air Products and | LAir Liquide vs. PPG Industries |
| IMCD NV vs. Air Products and | IMCD NV vs. PPG Industries | IMCD NV vs. Sherwin Williams Co | IMCD NV 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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