Correlation Between Air Liquide and Accor SA

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

Diversification Opportunities for Air Liquide and Accor SA

-0.13

Correlation Coefficient

Air Liquide  Accor SA

Good diversification

The 3 months correlation between Air and Accor is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Accor SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accor 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 Accor SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accor SA has no effect on the direction of Air Liquide i.e., Air Liquide and Accor SA go up and down completely randomly.

Pair Corralation between Air Liquide and Accor SA

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.79 times more return on investment than Accor SA. However, Air Liquide SA is 1.26 times less risky than Accor SA. It trades about 0.2 of its potential returns per unit of risk. Accor SA is currently generating about -0.06 per unit of risk. If you would invest  15,534  in Air Liquide SA on December 27, 2024 and sell it today you would earn a total of  2,346  from holding Air Liquide SA or generate 15.1% return on investment over 90 days.

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

Air Liquide SA  vs.  Accor 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 nearly fragile basic indicators, Air Liquide reported solid returns over the last few months and may actually be approaching a breakup point.

Accor SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Accor SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Accor SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Liquide and Accor SA

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

The idea behind Air Liquide SA and Accor 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.