Correlation Between LAir Liquide and Antero Midstream

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

Diversification Opportunities for LAir Liquide and Antero Midstream

0.49

Correlation Coefficient

LAir Liquide  Antero Midstream

Very weak diversification

The 3 months correlation between LAir and Antero is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and Antero Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Midstream Partners 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 Antero Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Midstream Partners has no effect on the direction of LAir Liquide i.e., LAir Liquide and Antero Midstream go up and down completely randomly.

Pair Corralation between LAir Liquide and Antero Midstream

Assuming the 90 days horizon LAir Liquide SA is expected to generate 0.86 times more return on investment than Antero Midstream. However, LAir Liquide SA is 1.16 times less risky than Antero Midstream. It trades about 0.23 of its potential returns per unit of risk. Antero Midstream Partners is currently generating about 0.19 per unit of risk. If you would invest  15,654  in LAir Liquide SA on December 28, 2024 and sell it today you would earn a total of  3,326  from holding LAir Liquide SA or generate 21.25% return on investment over 90 days.

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

LAir Liquide SA  vs.  Antero Midstream Partners

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 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, LAir Liquide reported solid returns over the last few months and may actually be approaching a breakup point.

Antero Midstream Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting primary indicators, Antero Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LAir Liquide and Antero Midstream

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

The idea behind LAir Liquide SA and Antero Midstream Partners 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.