Correlation Between Arkema SA and LAir Liquide

Can any of the company-specific risk be diversified away by investing in both Arkema SA and LAir Liquide 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 Arkema SA and LAir Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arkema SA and LAir Liquide SA, you can compare the effects of market volatilities on Arkema SA and LAir Liquide 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 Arkema SA with a short position of LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arkema SA and LAir Liquide.

Diversification Opportunities for Arkema SA and LAir Liquide

0.13

Correlation Coefficient

Arkema SA  LAir Liquide

Average diversification

The 3 months correlation between Arkema and LAir is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Arkema SA and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA and Arkema SA 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 Arkema SA are associated (or correlated) with LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of Arkema SA i.e., Arkema SA and LAir Liquide go up and down completely randomly.

Pair Corralation between Arkema SA and LAir Liquide

Assuming the 90 days horizon Arkema SA is expected to generate 0.41 times more return on investment than LAir Liquide. However, Arkema SA is 2.45 times less risky than LAir Liquide. It trades about -0.13 of its potential returns per unit of risk. LAir Liquide SA is currently generating about -0.15 per unit of risk. If you would invest  9,222  in Arkema SA on September 4, 2024 and sell it today you would lose (382.00) from holding Arkema SA or give up 4.14% of portfolio value over 90 days.

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

Arkema SA  vs.  LAir Liquide SA

Arkema SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arkema SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arkema SA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

LAir Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAir Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Arkema SA and LAir Liquide

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

The idea behind Arkema SA and LAir Liquide 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.