Correlation Between Air Liquide and Vinci SA

Can any of the company-specific risk be diversified away by investing in both Air Liquide and Vinci SA 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 Vinci SA 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 Vinci SA, you can compare the effects of market volatilities on Air Liquide and Vinci SA 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 Vinci SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Vinci SA.

Diversification Opportunities for Air Liquide and Vinci SA

0.94

Correlation Coefficient

Air Liquide  Vinci SA

Almost no diversification

The 3 months correlation between Air and Vinci is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Vinci SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vinci SA 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 Vinci SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vinci SA has no effect on the direction of Air Liquide i.e., Air Liquide and Vinci SA go up and down completely randomly.

Pair Corralation between Air Liquide and Vinci SA

Assuming the 90 days horizon Air Liquide is expected to generate 1.42 times less return on investment than Vinci SA. But when comparing it to its historical volatility, Air Liquide SA is 1.03 times less risky than Vinci SA. It trades about 0.2 of its potential returns per unit of risk. Vinci SA is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  9,872  in Vinci SA on December 28, 2024 and sell it today you would earn a total of  2,048  from holding Vinci SA or generate 20.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Air Liquide SA  vs.  Vinci SA

Air Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air Liquide sustained solid returns over the last few months and may actually be approaching a breakup point.

Vinci SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vinci SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vinci SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Liquide and Vinci SA

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

The idea behind Air Liquide SA and Vinci 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.