Correlation Between LAir Liquide and Douglas Emmett

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

Diversification Opportunities for LAir Liquide and Douglas Emmett

0.05

Correlation Coefficient

LAir Liquide  Douglas Emmett

Significant diversification

The 3 months correlation between LAir and Douglas is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett 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 Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of LAir Liquide i.e., LAir Liquide and Douglas Emmett go up and down completely randomly.

Pair Corralation between LAir Liquide and Douglas Emmett

Assuming the 90 days horizon LAir Liquide SA is expected to under-perform the Douglas Emmett. But the pink sheet apears to be less risky and, when comparing its historical volatility, LAir Liquide SA is 1.57 times less risky than Douglas Emmett. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Douglas Emmett is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,817  in Douglas Emmett on October 25, 2024 and sell it today you would lose (74.00) from holding Douglas Emmett or give up 4.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

LAir Liquide SA  vs.  Douglas Emmett

LAir Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAir Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Douglas Emmett

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with LAir Liquide and Douglas Emmett

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

The idea behind LAir Liquide SA and Douglas Emmett 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.