Correlation Between Canadian Utilities and Air Liquide

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

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

Diversification Opportunities for Canadian Utilities and Air Liquide

0.28

Correlation Coefficient

Canadian Utilities  Air Liquide

Modest diversification

The 3 months correlation between Canadian and Air is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Air Liquide go up and down completely randomly.

Pair Corralation between Canadian Utilities and Air Liquide

Assuming the 90 days horizon Canadian Utilities is expected to generate 2.82 times less return on investment than Air Liquide. But when comparing it to its historical volatility, Canadian Utilities Limited is 1.38 times less risky than Air Liquide. It trades about 0.08 of its potential returns per unit of risk. Air Liquide SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  15,540  in Air Liquide SA on December 29, 2024 and sell it today you would earn a total of  2,040  from holding Air Liquide SA or generate 13.13% return on investment over 90 days.

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

Canadian Utilities Limited  vs.  Air Liquide SA

Canadian Utilities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Air Liquide reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Utilities and Air Liquide

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

The idea behind Canadian Utilities Limited and Air 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.