Correlation Between Air Liquide and SEB SA

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

Diversification Opportunities for Air Liquide and SEB SA

0.64

Correlation Coefficient

Air Liquide  SEB SA

Poor diversification

The 3 months correlation between Air and SEB is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and SEB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEB 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 SEB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEB SA has no effect on the direction of Air Liquide i.e., Air Liquide and SEB SA go up and down completely randomly.

Pair Corralation between Air Liquide and SEB SA

Assuming the 90 days horizon Air Liquide SA is expected to under-perform the SEB SA. But the stock apears to be less risky and, when comparing its historical volatility, Air Liquide SA is 1.66 times less risky than SEB SA. The stock trades about -0.09 of its potential returns per unit of risk. The SEB SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  9,340  in SEB SA on September 2, 2024 and sell it today you would lose (360.00) from holding SEB SA or give up 3.85% of portfolio value over 90 days.

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

Air Liquide SA  vs.  SEB SA

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SEB SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEB SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SEB SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Air Liquide and SEB SA

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

The idea behind Air Liquide SA and SEB 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.