Correlation Between Dupont De and LAir Liquide

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

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

Diversification Opportunities for Dupont De and LAir Liquide

0.32

Correlation Coefficient

Dupont De  LAir Liquide

Weak diversification

The 3 months correlation between Dupont and LAir is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and LAir Liquide go up and down completely randomly.

Pair Corralation between Dupont De and LAir Liquide

Allowing for the 90-day total investment horizon Dupont De is expected to generate 17.66 times less return on investment than LAir Liquide. In addition to that, Dupont De is 1.03 times more volatile than LAir Liquide SA. It trades about 0.01 of its total potential returns per unit of risk. LAir Liquide SA is currently generating about 0.2 per unit of volatility. If you would invest  16,172  in LAir Liquide SA on December 27, 2024 and sell it today you would earn a total of  3,117  from holding LAir Liquide SA or generate 19.27% return on investment over 90 days.

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

Dupont De Nemours  vs.  LAir Liquide SA

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

LAir Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LAir Liquide SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, LAir Liquide reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and LAir Liquide

The main advantage of trading using opposite Dupont De and LAir Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.