Correlation Between Air Liquide and Thales SA

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

Diversification Opportunities for Air Liquide and Thales SA

0.91

Correlation Coefficient

Air Liquide  Thales SA

Almost no diversification

The 3 months correlation between Air and Thales is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Air Liquide i.e., Air Liquide and Thales SA go up and down completely randomly.

Pair Corralation between Air Liquide and Thales SA

Assuming the 90 days horizon Air Liquide is expected to generate 4.94 times less return on investment than Thales SA. But when comparing it to its historical volatility, Air Liquide SA is 1.81 times less risky than Thales SA. It trades about 0.19 of its potential returns per unit of risk. Thales SA is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest  15,455  in Thales SA on December 1, 2024 and sell it today you would earn a total of  3,710  from holding Thales SA or generate 24.01% 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.  Thales 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 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air Liquide may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Thales SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thales SA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Thales SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Liquide and Thales SA

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

The idea behind Air Liquide SA and Thales 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..