Correlation Between Air Liquide and Albemarle

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

Diversification Opportunities for Air Liquide and Albemarle

-0.64

Correlation Coefficient

Air Liquide  Albemarle

Excellent diversification

The 3 months correlation between Air and Albemarle is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Air Liquide i.e., Air Liquide and Albemarle go up and down completely randomly.

Pair Corralation between Air Liquide and Albemarle

Assuming the 90 days trading horizon Air Liquide SA is expected to generate 0.34 times more return on investment than Albemarle. However, Air Liquide SA is 2.96 times less risky than Albemarle. It trades about 0.2 of its potential returns per unit of risk. Albemarle is currently generating about -0.17 per unit of risk. If you would invest  15,736  in Air Liquide SA on November 29, 2024 and sell it today you would earn a total of  1,854  from holding Air Liquide SA or generate 11.78% return on investment over 90 days.

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

Air Liquide SA  vs.  Albemarle

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. In spite of comparatively uncertain essential indicators, Air Liquide may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Albemarle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Albemarle 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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Air Liquide and Albemarle

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

The idea behind Air Liquide SA and Albemarle 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.