Correlation Between Auto Trader and Air Liquide

Can any of the company-specific risk be diversified away by investing in both Auto Trader and Air 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 Auto Trader and Air Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Auto Trader Group and Air Liquide SA, you can compare the effects of market volatilities on Auto Trader and Air 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 Auto Trader with a short position of Air Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Air Liquide.

Diversification Opportunities for Auto Trader and Air Liquide

-0.03

Correlation Coefficient

Auto Trader  Air Liquide

Good diversification

The 3 months correlation between Auto and Air is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA and Auto Trader 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 Auto Trader Group are associated (or correlated) with Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Auto Trader i.e., Auto Trader and Air Liquide go up and down completely randomly.

Pair Corralation between Auto Trader and Air Liquide

Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Air Liquide. In addition to that, Auto Trader is 1.12 times more volatile than Air Liquide SA. It trades about -0.08 of its total potential returns per unit of risk. Air Liquide SA is currently generating about 0.23 per unit of volatility. If you would invest  15,536  in Air Liquide SA on December 20, 2024 and sell it today you would earn a total of  2,482  from holding Air Liquide SA or generate 15.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Auto Trader Group  vs.  Air Liquide SA

Auto Trader Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Air Liquide SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Air Liquide unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auto Trader and Air Liquide

The main advantage of trading using opposite Auto Trader and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Air 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 Air Liquide will offset losses from the drop in Air Liquide's long position.

The idea behind Auto Trader Group and Air Liquide SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.