Correlation Between LAir Liquide and ENTREPARTICULIERS

Can any of the company-specific risk be diversified away by investing in both LAir Liquide and ENTREPARTICULIERS 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 LAir Liquide and ENTREPARTICULIERS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LAir Liquide SA and ENTREPARTICULIERS EO 10, you can compare the effects of market volatilities on LAir Liquide and ENTREPARTICULIERS 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 LAir Liquide with a short position of ENTREPARTICULIERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and ENTREPARTICULIERS.

Diversification Opportunities for LAir Liquide and ENTREPARTICULIERS

0.75

Correlation Coefficient

LAir Liquide  ENTREPARTICULIERS

Poor diversification

The 3 months correlation between LAir and ENTREPARTICULIERS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and ENTREPARTICULIERS EO 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTREPARTICULIERS EO and LAir 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 LAir Liquide SA are associated (or correlated) with ENTREPARTICULIERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTREPARTICULIERS EO has no effect on the direction of LAir Liquide i.e., LAir Liquide and ENTREPARTICULIERS go up and down completely randomly.

Pair Corralation between LAir Liquide and ENTREPARTICULIERS

Assuming the 90 days trading horizon LAir Liquide SA is expected to generate 0.28 times more return on investment than ENTREPARTICULIERS. However, LAir Liquide SA is 3.53 times less risky than ENTREPARTICULIERS. It trades about -0.09 of its potential returns per unit of risk. ENTREPARTICULIERS EO 10 is currently generating about -0.1 per unit of risk. If you would invest  17,030  in LAir Liquide SA on September 13, 2024 and sell it today you would lose (1,052) from holding LAir Liquide SA or give up 6.18% of portfolio value over 90 days.

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

LAir Liquide SA  vs.  ENTREPARTICULIERS EO 10

LAir Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAir Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LAir Liquide is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ENTREPARTICULIERS EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENTREPARTICULIERS EO 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LAir Liquide and ENTREPARTICULIERS

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

The idea behind LAir Liquide SA and ENTREPARTICULIERS EO 10 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.