Correlation Between Air Liquide and Mitsui Chemicals

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

Diversification Opportunities for Air Liquide and Mitsui Chemicals

0.72

Correlation Coefficient

Air Liquide  Mitsui Chemicals

Poor diversification

The 3 months correlation between Air and Mitsui is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals 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 Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals has no effect on the direction of Air Liquide i.e., Air Liquide and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Air Liquide and Mitsui Chemicals

Assuming the 90 days trading horizon Air Liquide SA is expected to generate 0.85 times more return on investment than Mitsui Chemicals. However, Air Liquide SA is 1.17 times less risky than Mitsui Chemicals. It trades about 0.21 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.1 per unit of risk. If you would invest  15,422  in Air Liquide SA on December 22, 2024 and sell it today you would earn a total of  2,334  from holding Air Liquide SA or generate 15.13% return on investment over 90 days.

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

Air Liquide SA  vs.  Mitsui Chemicals

Air Liquide SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Air Liquide unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mitsui Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Chemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Mitsui Chemicals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Air Liquide and Mitsui Chemicals

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

The idea behind Air Liquide SA and Mitsui Chemicals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.