Correlation Between Air Liquide and Nitto Denko
Can any of the company-specific risk be diversified away by investing in both Air Liquide and Nitto Denko 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 Nitto Denko 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 Nitto Denko Corp, you can compare the effects of market volatilities on Air Liquide and Nitto Denko 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 Nitto Denko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Nitto Denko.
Diversification Opportunities for Air Liquide and Nitto Denko
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Nitto is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Nitto Denko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitto Denko Corp 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 Nitto Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitto Denko Corp has no effect on the direction of Air Liquide i.e., Air Liquide and Nitto Denko go up and down completely randomly.
Pair Corralation between Air Liquide and Nitto Denko
Assuming the 90 days horizon Air Liquide is expected to generate 1.8 times less return on investment than Nitto Denko. But when comparing it to its historical volatility, Air Liquide SA is 1.38 times less risky than Nitto Denko. It trades about 0.03 of its potential returns per unit of risk. Nitto Denko Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,165 in Nitto Denko Corp on September 1, 2024 and sell it today you would earn a total of 430.00 from holding Nitto Denko Corp or generate 36.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Liquide SA vs. Nitto Denko Corp
Performance |
| Timeline |
| Air Liquide SA |
| Nitto Denko Corp |
Air Liquide and Nitto Denko Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Liquide and Nitto Denko
The main advantage of trading using opposite Air Liquide and Nitto Denko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide position performs unexpectedly, Nitto Denko 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 Nitto Denko will offset losses from the drop in Nitto Denko'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 |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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