Correlation Between Air Liquide and Croda International

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

Diversification Opportunities for Air Liquide and Croda International

-0.25

Correlation Coefficient

Air Liquide  Croda International

Very good diversification

The 3 months correlation between Air and Croda is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Croda International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Croda International PLC 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 Croda International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Croda International PLC has no effect on the direction of Air Liquide i.e., Air Liquide and Croda International go up and down completely randomly.

Pair Corralation between Air Liquide and Croda International

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.69 times more return on investment than Croda International. However, Air Liquide SA is 1.44 times less risky than Croda International. It trades about 0.13 of its potential returns per unit of risk. Croda International PLC is currently generating about -0.04 per unit of risk. If you would invest  3,369  in Air Liquide SA on December 4, 2024 and sell it today you would earn a total of  299.00  from holding Air Liquide SA or generate 8.88% return on investment over 90 days.

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

Air Liquide SA  vs.  Croda International PLC

Air Liquide SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Air Liquide may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Croda International PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Croda International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Croda International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Air Liquide and Croda International

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

The idea behind Air Liquide SA and Croda International PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.