Correlation Between LAir Liquide and Global Lights

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

Diversification Opportunities for LAir Liquide and Global Lights

-0.83

Correlation Coefficient

LAir Liquide  Global Lights

Pay attention - limited upside

The 3 months correlation between LAir and Global is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and Global Lights Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Lights Acquisition 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 Global Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Lights Acquisition has no effect on the direction of LAir Liquide i.e., LAir Liquide and Global Lights go up and down completely randomly.

Pair Corralation between LAir Liquide and Global Lights

Assuming the 90 days horizon LAir Liquide SA is expected to under-perform the Global Lights. In addition to that, LAir Liquide is 16.68 times more volatile than Global Lights Acquisition. It trades about -0.06 of its total potential returns per unit of risk. Global Lights Acquisition is currently generating about -0.22 per unit of volatility. If you would invest  1,080  in Global Lights Acquisition on October 11, 2024 and sell it today you would lose (5.00) from holding Global Lights Acquisition or give up 0.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

LAir Liquide SA  vs.  Global Lights Acquisition

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Global Lights Acquisition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Lights Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Global Lights is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LAir Liquide and Global Lights

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

The idea behind LAir Liquide SA and Global Lights Acquisition 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .