Correlation Between RPM International and Linde Plc
Can any of the company-specific risk be diversified away by investing in both RPM International and Linde Plc 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 RPM International and Linde Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RPM International and Linde plc Ordinary, you can compare the effects of market volatilities on RPM International and Linde Plc 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 RPM International with a short position of Linde Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPM International and Linde Plc.
Diversification Opportunities for RPM International and Linde Plc
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RPM and Linde is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding RPM International and Linde plc Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc Ordinary and RPM International 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 RPM International are associated (or correlated) with Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc Ordinary has no effect on the direction of RPM International i.e., RPM International and Linde Plc go up and down completely randomly.
Pair Corralation between RPM International and Linde Plc
Considering the 90-day investment horizon RPM International is expected to generate 1.43 times more return on investment than Linde Plc. However, RPM International is 1.43 times more volatile than Linde plc Ordinary. It trades about 0.05 of its potential returns per unit of risk. Linde plc Ordinary is currently generating about 0.07 per unit of risk. If you would invest 9,911 in RPM International on August 27, 2024 and sell it today you would earn a total of 3,876 from holding RPM International or generate 39.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RPM International vs. Linde plc Ordinary
Performance |
| Timeline |
| RPM International |
| Linde plc Ordinary |
RPM International and Linde Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RPM International and Linde Plc
The main advantage of trading using opposite RPM International and Linde Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPM International position performs unexpectedly, Linde Plc 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 Linde Plc will offset losses from the drop in Linde Plc's long position.| RPM International vs. Oil Dri | RPM International vs. H B Fuller | RPM International vs. Northern Technologies | RPM International vs. Cabot |
| Linde Plc vs. PPG Industries | Linde Plc vs. Ecolab Inc | Linde Plc vs. Sherwin Williams Co | Linde Plc vs. LyondellBasell Industries NV |
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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