Correlation Between LAir Liquide and Neo Performance
Can any of the company-specific risk be diversified away by investing in both LAir Liquide and Neo Performance 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 Neo Performance 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 Neo Performance Materials, you can compare the effects of market volatilities on LAir Liquide and Neo Performance 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 Neo Performance. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and Neo Performance.
Diversification Opportunities for LAir Liquide and Neo Performance
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LAir and Neo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and Neo Performance Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neo Performance Materials 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 Neo Performance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neo Performance Materials has no effect on the direction of LAir Liquide i.e., LAir Liquide and Neo Performance go up and down completely randomly.
Pair Corralation between LAir Liquide and Neo Performance
Assuming the 90 days horizon LAir Liquide SA is expected to generate 0.53 times more return on investment than Neo Performance. However, LAir Liquide SA is 1.88 times less risky than Neo Performance. It trades about 0.05 of its potential returns per unit of risk. Neo Performance Materials is currently generating about 0.0 per unit of risk. If you would invest 13,769 in LAir Liquide SA on November 29, 2024 and sell it today you would earn a total of 4,357 from holding LAir Liquide SA or generate 31.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.99% |
| Values | Daily Returns |
LAir Liquide SA vs. Neo Performance Materials
Performance |
| Timeline |
| LAir Liquide SA |
| Neo Performance Materials |
LAir Liquide and Neo Performance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAir Liquide and Neo Performance
The main advantage of trading using opposite LAir Liquide and Neo Performance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide position performs unexpectedly, Neo Performance 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 Neo Performance will offset losses from the drop in Neo Performance'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 |
| Neo Performance vs. Mativ Holdings | Neo Performance vs. Sensient Technologies | Neo Performance vs. Koppers Holdings | Neo Performance vs. Axalta Coating Systems |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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