Correlation Between Air Liquide and Ganfeng Lithium

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

Diversification Opportunities for Air Liquide and Ganfeng Lithium

0.6

Correlation Coefficient

Air Liquide  Ganfeng Lithium

Poor diversification

The 3 months correlation between Air and Ganfeng is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Ganfeng Lithium Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ganfeng Lithium 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 Ganfeng Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ganfeng Lithium has no effect on the direction of Air Liquide i.e., Air Liquide and Ganfeng Lithium go up and down completely randomly.

Pair Corralation between Air Liquide and Ganfeng Lithium

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.45 times more return on investment than Ganfeng Lithium. However, Air Liquide SA is 2.24 times less risky than Ganfeng Lithium. It trades about 0.17 of its potential returns per unit of risk. Ganfeng Lithium Co is currently generating about 0.02 per unit of risk. If you would invest  15,540  in Air Liquide SA on December 29, 2024 and sell it today you would earn a total of  2,040  from holding Air Liquide SA or generate 13.13% return on investment over 90 days.

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

Air Liquide SA  vs.  Ganfeng Lithium Co

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 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Air Liquide reported solid returns over the last few months and may actually be approaching a breakup point.

Ganfeng Lithium

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ganfeng Lithium Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ganfeng Lithium is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Liquide and Ganfeng Lithium

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

The idea behind Air Liquide SA and Ganfeng Lithium Co 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.