Correlation Between LAir Liquide and 26442CAB0

Can any of the company-specific risk be diversified away by investing in both LAir Liquide and 26442CAB0 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 26442CAB0 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 DUKE ENERGY CAROLINAS, you can compare the effects of market volatilities on LAir Liquide and 26442CAB0 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 26442CAB0. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and 26442CAB0.

Diversification Opportunities for LAir Liquide and 26442CAB0

0.06

Correlation Coefficient

LAir Liquide  26442CAB0

Significant diversification

The 3 months correlation between LAir and 26442CAB0 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and DUKE ENERGY CAROLINAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUKE ENERGY CAROLINAS 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 26442CAB0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUKE ENERGY CAROLINAS has no effect on the direction of LAir Liquide i.e., LAir Liquide and 26442CAB0 go up and down completely randomly.

Pair Corralation between LAir Liquide and 26442CAB0

Assuming the 90 days horizon LAir Liquide SA is expected to generate 1.26 times more return on investment than 26442CAB0. However, LAir Liquide is 1.26 times more volatile than DUKE ENERGY CAROLINAS. It trades about 0.22 of its potential returns per unit of risk. DUKE ENERGY CAROLINAS is currently generating about 0.04 per unit of risk. If you would invest  15,850  in LAir Liquide SA on December 23, 2024 and sell it today you would earn a total of  3,441  from holding LAir Liquide SA or generate 21.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.05%
Values	Daily Returns

LAir Liquide SA  vs.  DUKE ENERGY CAROLINAS

LAir Liquide SA

Risk-Adjusted Performance

Solid

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.

DUKE ENERGY CAROLINAS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DUKE ENERGY CAROLINAS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 26442CAB0 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LAir Liquide and 26442CAB0

The main advantage of trading using opposite LAir Liquide and 26442CAB0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide position performs unexpectedly, 26442CAB0 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 26442CAB0 will offset losses from the drop in 26442CAB0's long position.

The idea behind LAir Liquide SA and DUKE ENERGY CAROLINAS 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.