Correlation Between Air Liquide and Trinseo SA

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

Diversification Opportunities for Air Liquide and Trinseo SA

-0.23

Correlation Coefficient

Air Liquide  Trinseo SA

Very good diversification

The 3 months correlation between Air and Trinseo is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Trinseo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinseo SA 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 Trinseo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinseo SA has no effect on the direction of Air Liquide i.e., Air Liquide and Trinseo SA go up and down completely randomly.

Pair Corralation between Air Liquide and Trinseo SA

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.27 times more return on investment than Trinseo SA. However, Air Liquide SA is 3.77 times less risky than Trinseo SA. It trades about 0.21 of its potential returns per unit of risk. Trinseo SA is currently generating about -0.08 per unit of risk. If you would invest  3,241  in Air Liquide SA on December 27, 2024 and sell it today you would earn a total of  548.00  from holding Air Liquide SA or generate 16.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Air Liquide SA  vs.  Trinseo SA

Air Liquide SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Air Liquide showed solid returns over the last few months and may actually be approaching a breakup point.

Trinseo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trinseo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Air Liquide and Trinseo SA

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

The idea behind Air Liquide SA and Trinseo SA 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.