Correlation Between Air Liquide and LAir Liquide
Can any of the company-specific risk be diversified away by investing in both Air Liquide and LAir Liquide 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 LAir Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Liquide SA and LAir Liquide SA, you can compare the effects of market volatilities on Air Liquide and LAir Liquide 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 LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and LAir Liquide.
Diversification Opportunities for Air Liquide and LAir Liquide
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Air and LAir is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA 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 SA are associated (or correlated) with LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of Air Liquide i.e., Air Liquide and LAir Liquide go up and down completely randomly.
Pair Corralation between Air Liquide and LAir Liquide
Assuming the 90 days horizon Air Liquide SA is expected to under-perform the LAir Liquide. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air Liquide SA is 1.1 times less risky than LAir Liquide. The pink sheet trades about -0.35 of its potential returns per unit of risk. The LAir Liquide SA is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest 18,418 in LAir Liquide SA on August 23, 2024 and sell it today you would lose (1,363) from holding LAir Liquide SA or give up 7.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Liquide SA vs. LAir Liquide SA
Performance |
| Timeline |
| Air Liquide SA |
| LAir Liquide SA |
Air Liquide and LAir Liquide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Liquide and LAir Liquide
The main advantage of trading using opposite Air Liquide and LAir Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide position performs unexpectedly, LAir Liquide 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 LAir Liquide will offset losses from the drop in LAir Liquide's long position.| Air Liquide vs. Asia Carbon Industries | Air Liquide vs. Akzo Nobel NV | Air Liquide vs. Avoca LLC | Air Liquide vs. AGC Inc ADR |
| 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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