Correlation Between Air Liquide and Air Products

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

Diversification Opportunities for Air Liquide and Air Products

-0.15

Correlation Coefficient

Air Liquide  Air Products

Good diversification

The 3 months correlation between Air and Air is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Air Liquide i.e., Air Liquide and Air Products go up and down completely randomly.

Pair Corralation between Air Liquide and Air Products

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.66 times more return on investment than Air Products. However, Air Liquide SA is 1.53 times less risky than Air Products. It trades about 0.2 of its potential returns per unit of risk. Air Products and is currently generating about -0.02 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.  Air Products and

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.

Air Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Products and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air Products 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 Air Products

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

The idea behind Air Liquide SA and Air Products and 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..