Correlation Between Air Liquide and RPM International

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

Diversification Opportunities for Air Liquide and RPM International

-0.82

Correlation Coefficient

Air Liquide  RPM International

Pay attention - limited upside

The 3 months correlation between Air and RPM is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International 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 RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of Air Liquide i.e., Air Liquide and RPM International go up and down completely randomly.

Pair Corralation between Air Liquide and RPM International

Assuming the 90 days horizon Air Liquide SA is expected to under-perform the RPM International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air Liquide SA is 1.16 times less risky than RPM International. The pink sheet trades about -0.14 of its potential returns per unit of risk. The RPM International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11,768  in RPM International on September 11, 2024 and sell it today you would earn a total of  1,612  from holding RPM International or generate 13.7% return on investment over 90 days.

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

Air Liquide SA  vs.  RPM International

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.

RPM International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RPM International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, RPM International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Liquide and RPM International

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

The idea behind Air Liquide SA and RPM International 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.