Correlation Between Air Liquide and PRECISION DRILLING

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

Diversification Opportunities for Air Liquide and PRECISION DRILLING

-0.53

Correlation Coefficient

Air Liquide  PRECISION DRILLING

Excellent diversification

The 3 months correlation between Air and PRECISION is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING 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 PRECISION DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRECISION DRILLING has no effect on the direction of Air Liquide i.e., Air Liquide and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between Air Liquide and PRECISION DRILLING

Assuming the 90 days trading horizon Air Liquide is expected to generate 3.57 times less return on investment than PRECISION DRILLING. But when comparing it to its historical volatility, Air Liquide SA is 2.26 times less risky than PRECISION DRILLING. It trades about 0.29 of its potential returns per unit of risk. PRECISION DRILLING P is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  5,400  in PRECISION DRILLING P on October 22, 2024 and sell it today you would earn a total of  950.00  from holding PRECISION DRILLING P or generate 17.59% 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.  PRECISION DRILLING P

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. In spite of comparatively stable essential indicators, Air Liquide is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

PRECISION DRILLING

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PRECISION DRILLING P are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, PRECISION DRILLING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Liquide and PRECISION DRILLING

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

The idea behind Air Liquide SA and PRECISION DRILLING P 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.