Correlation Between Air Liquide and Rayonier Advanced

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

Diversification Opportunities for Air Liquide and Rayonier Advanced

-0.52

Correlation Coefficient

Air Liquide  Rayonier Advanced

Excellent diversification

The 3 months correlation between Air and Rayonier is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced 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 Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of Air Liquide i.e., Air Liquide and Rayonier Advanced go up and down completely randomly.

Pair Corralation between Air Liquide and Rayonier Advanced

Assuming the 90 days horizon Air Liquide SA is expected to under-perform the Rayonier Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Air Liquide SA is 3.7 times less risky than Rayonier Advanced. The stock trades about -0.05 of its potential returns per unit of risk. The Rayonier Advanced Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  520.00  in Rayonier Advanced Materials on September 22, 2024 and sell it today you would earn a total of  180.00  from holding Rayonier Advanced Materials or generate 34.62% return on investment over 90 days.

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

Air Liquide SA  vs.  Rayonier Advanced Materials

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Air Liquide SA and Rayonier Advanced Materials 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.