Correlation Between LAir Liquide and METHODE ELECTRONICS

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

Diversification Opportunities for LAir Liquide and METHODE ELECTRONICS

-0.77

Correlation Coefficient

LAir Liquide  METHODE ELECTRONICS

Pay attention - limited upside

The 3 months correlation between LAir and METHODE is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and METHODE ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METHODE ELECTRONICS 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 METHODE ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METHODE ELECTRONICS has no effect on the direction of LAir Liquide i.e., LAir Liquide and METHODE ELECTRONICS go up and down completely randomly.

Pair Corralation between LAir Liquide and METHODE ELECTRONICS

Assuming the 90 days trading horizon LAir Liquide SA is expected to generate 0.24 times more return on investment than METHODE ELECTRONICS. However, LAir Liquide SA is 4.21 times less risky than METHODE ELECTRONICS. It trades about 0.17 of its potential returns per unit of risk. METHODE ELECTRONICS is currently generating about -0.15 per unit of risk. If you would invest  15,502  in LAir Liquide SA on December 30, 2024 and sell it today you would earn a total of  2,184  from holding LAir Liquide SA or generate 14.09% return on investment over 90 days.

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

LAir Liquide SA  vs.  METHODE ELECTRONICS

LAir Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LAir Liquide SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, LAir Liquide unveiled solid returns over the last few months and may actually be approaching a breakup point.

METHODE ELECTRONICS

Risk-Adjusted Performance

Very Weak

Over the last 90 days METHODE ELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with LAir Liquide and METHODE ELECTRONICS

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

The idea behind LAir Liquide SA and METHODE ELECTRONICS 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 Global Correlations module to find global opportunities by holding instruments from different markets.