Correlation Between Air Liquide and Industrial Nanotech

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

Diversification Opportunities for Air Liquide and Industrial Nanotech

0.19

Correlation Coefficient

Air Liquide  Industrial Nanotech

Average diversification

The 3 months correlation between Air and Industrial is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Industrial Nanotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Nanotech 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 Industrial Nanotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Nanotech has no effect on the direction of Air Liquide i.e., Air Liquide and Industrial Nanotech go up and down completely randomly.

Pair Corralation between Air Liquide and Industrial Nanotech

Assuming the 90 days horizon Air Liquide is expected to generate 1573.85 times less return on investment than Industrial Nanotech. But when comparing it to its historical volatility, Air Liquide SA is 147.61 times less risky than Industrial Nanotech. It trades about 0.02 of its potential returns per unit of risk. Industrial Nanotech is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  0.17  in Industrial Nanotech on October 22, 2024 and sell it today you would lose (0.16) from holding Industrial Nanotech or give up 94.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Air Liquide SA  vs.  Industrial Nanotech

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Industrial Nanotech

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Nanotech are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Industrial Nanotech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Liquide and Industrial Nanotech

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

The idea behind Air Liquide SA and Industrial Nanotech 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 Global Correlations module to find global opportunities by holding instruments from different markets.