Correlation Between Cabot and Linde Plc

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

By analyzing existing cross correlation between Cabot and Linde plc Ordinary, you can compare the effects of market volatilities on Cabot and Linde Plc 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 Cabot with a short position of Linde Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and Linde Plc.

Diversification Opportunities for Cabot and Linde Plc

0.16

Correlation Coefficient

Cabot  Linde Plc

Average diversification

The 3 months correlation between Cabot and Linde is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Linde plc Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc Ordinary and Cabot 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 Cabot are associated (or correlated) with Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc Ordinary has no effect on the direction of Cabot i.e., Cabot and Linde Plc go up and down completely randomly.

Pair Corralation between Cabot and Linde Plc

Considering the 90-day investment horizon Cabot is expected to generate 1.87 times more return on investment than Linde Plc. However, Cabot is 1.87 times more volatile than Linde plc Ordinary. It trades about 0.08 of its potential returns per unit of risk. Linde plc Ordinary is currently generating about -0.04 per unit of risk. If you would invest  10,118  in Cabot on September 1, 2024 and sell it today you would earn a total of  844.00  from holding Cabot or generate 8.34% return on investment over 90 days.

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

Cabot  vs.  Linde plc Ordinary

Cabot

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Cabot may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Linde plc Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Linde Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cabot and Linde Plc

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

The idea behind Cabot and Linde plc Ordinary 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.