Correlation Between Air Liquide and Innospec
Can any of the company-specific risk be diversified away by investing in both Air Liquide and Innospec 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 Innospec 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 Innospec, you can compare the effects of market volatilities on Air Liquide and Innospec 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 Innospec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Innospec.
Diversification Opportunities for Air Liquide and Innospec
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Innospec is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Innospec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innospec 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 Innospec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innospec has no effect on the direction of Air Liquide i.e., Air Liquide and Innospec go up and down completely randomly.
Pair Corralation between Air Liquide and Innospec
Assuming the 90 days horizon Air Liquide SA is expected to under-perform the Innospec. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air Liquide SA is 2.64 times less risky than Innospec. The pink sheet trades about -0.25 of its potential returns per unit of risk. The Innospec is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 10,819 in Innospec on September 4, 2024 and sell it today you would earn a total of 1,126 from holding Innospec or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Liquide SA vs. Innospec
Performance |
| Timeline |
| Air Liquide SA |
| Innospec |
Air Liquide and Innospec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Liquide and Innospec
The main advantage of trading using opposite Air Liquide and Innospec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide position performs unexpectedly, Innospec 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 Innospec will offset losses from the drop in Innospec'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 |
| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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