Correlation Between Covestro and LAir Liquide
Can any of the company-specific risk be diversified away by investing in both Covestro 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 Covestro and LAir Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Covestro AG and LAir Liquide SA, you can compare the effects of market volatilities on Covestro 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 Covestro with a short position of LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Covestro and LAir Liquide.
Diversification Opportunities for Covestro and LAir Liquide
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Covestro and LAir is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Covestro AG 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 Covestro 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 Covestro AG 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 Covestro i.e., Covestro and LAir Liquide go up and down completely randomly.
Pair Corralation between Covestro and LAir Liquide
Assuming the 90 days horizon Covestro AG is expected to generate 1.16 times more return on investment than LAir Liquide. However, Covestro is 1.16 times more volatile than LAir Liquide SA. It trades about 0.13 of its potential returns per unit of risk. LAir Liquide SA is currently generating about -0.05 per unit of risk. If you would invest 4,785 in Covestro AG on September 3, 2024 and sell it today you would earn a total of 1,580 from holding Covestro AG or generate 33.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Covestro AG vs. LAir Liquide SA
Performance |
| Timeline |
| Covestro AG |
| LAir Liquide SA |
Covestro and LAir Liquide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Covestro and LAir Liquide
The main advantage of trading using opposite Covestro and LAir Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Covestro 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.| Covestro vs. LAir Liquide SA | Covestro vs. Asia Carbon Industries | Covestro vs. Akzo Nobel NV | Covestro vs. Avoca LLC |
| LAir Liquide vs. Asia Carbon Industries | LAir Liquide vs. Akzo Nobel NV | LAir Liquide vs. Avoca LLC | LAir Liquide vs. AGC Inc ADR |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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