Correlation Between Air Liquide and Micron Technology

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

Diversification Opportunities for Air Liquide and Micron Technology

-0.16

Correlation Coefficient

Air Liquide  Micron Technology

Good diversification

The 3 months correlation between Air and Micron is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Air Liquide i.e., Air Liquide and Micron Technology go up and down completely randomly.

Pair Corralation between Air Liquide and Micron Technology

Assuming the 90 days horizon Air Liquide SA is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, Air Liquide SA is 3.11 times less risky than Micron Technology. The stock trades about -0.08 of its potential returns per unit of risk. The Micron Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,795  in Micron Technology on September 15, 2024 and sell it today you would earn a total of  1,937  from holding Micron Technology or generate 24.85% 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.  Micron Technology

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 nearly stable basic indicators, Air Liquide is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Micron Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Liquide and Micron Technology

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

The idea behind Air Liquide SA and Micron Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.