Correlation Between Air Liquide and Take Two

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

Diversification Opportunities for Air Liquide and Take Two

-0.88

Correlation Coefficient

Air Liquide  Take Two

Pay attention - limited upside

The 3 months correlation between Air and Take is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive 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 Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of Air Liquide i.e., Air Liquide and Take Two go up and down completely randomly.

Pair Corralation between Air Liquide and Take Two

Assuming the 90 days trading horizon Air Liquide is expected to generate 2.71 times less return on investment than Take Two. But when comparing it to its historical volatility, Air Liquide SA is 1.48 times less risky than Take Two. It trades about 0.02 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15,618  in Take Two Interactive Software on October 24, 2024 and sell it today you would earn a total of  2,218  from holding Take Two Interactive Software or generate 14.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Air Liquide SA  vs.  Take Two Interactive Software

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Take Two Interactive

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Take Two reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Liquide and Take Two

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

The idea behind Air Liquide SA and Take Two Interactive Software 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 Transaction History module to view history of all your transactions and understand their impact on performance.