Correlation Between Linde PLC and LyondellBasell Industries
Can any of the company-specific risk be diversified away by investing in both Linde PLC and LyondellBasell Industries 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 Linde PLC and LyondellBasell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linde PLC and LyondellBasell Industries NV, you can compare the effects of market volatilities on Linde PLC and LyondellBasell Industries 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 Linde PLC with a short position of LyondellBasell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linde PLC and LyondellBasell Industries.
Diversification Opportunities for Linde PLC and LyondellBasell Industries
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Linde and LyondellBasell is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Linde PLC and LyondellBasell Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LyondellBasell Industries and Linde PLC 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 Linde PLC are associated (or correlated) with LyondellBasell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LyondellBasell Industries has no effect on the direction of Linde PLC i.e., Linde PLC and LyondellBasell Industries go up and down completely randomly.
Pair Corralation between Linde PLC and LyondellBasell Industries
Assuming the 90 days trading horizon Linde PLC is expected to generate 0.4 times more return on investment than LyondellBasell Industries. However, Linde PLC is 2.5 times less risky than LyondellBasell Industries. It trades about -0.44 of its potential returns per unit of risk. LyondellBasell Industries NV is currently generating about -0.27 per unit of risk. If you would invest 43,122 in Linde PLC on September 25, 2024 and sell it today you would lose (2,862) from holding Linde PLC or give up 6.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Linde PLC vs. LyondellBasell Industries NV
Performance |
| Timeline |
| Linde PLC |
| LyondellBasell Industries |
Linde PLC and LyondellBasell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Linde PLC and LyondellBasell Industries
The main advantage of trading using opposite Linde PLC and LyondellBasell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linde PLC position performs unexpectedly, LyondellBasell Industries 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 LyondellBasell Industries will offset losses from the drop in LyondellBasell Industries' long position.| Linde PLC vs. Air Liquide SA | Linde PLC vs. The Sherwin Williams | Linde PLC vs. Ecolab Inc | Linde PLC vs. Dupont De Nemours |
| LyondellBasell Industries vs. Linde PLC | LyondellBasell Industries vs. Air Liquide SA | LyondellBasell Industries vs. The Sherwin Williams | LyondellBasell Industries 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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