Correlation Between Focus Graphite and Air Liquide

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

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

Diversification Opportunities for Focus Graphite and Air Liquide

0.51

Correlation Coefficient

Focus Graphite  Air Liquide

Very weak diversification

The 3 months correlation between Focus and Air is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite 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 Focus Graphite 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 Focus Graphite 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 Focus Graphite i.e., Focus Graphite and Air Liquide go up and down completely randomly.

Pair Corralation between Focus Graphite and Air Liquide

Assuming the 90 days horizon Focus Graphite is expected to generate 10.06 times more return on investment than Air Liquide. However, Focus Graphite is 10.06 times more volatile than Air Liquide SA. It trades about 0.02 of its potential returns per unit of risk. Air Liquide SA is currently generating about -0.22 per unit of risk. If you would invest  6.00  in Focus Graphite on October 6, 2024 and sell it today you would lose (1.00) from holding Focus Graphite or give up 16.67% of portfolio value over 90 days.

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

Focus Graphite  vs.  Air Liquide SA

Focus Graphite

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Graphite are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Focus Graphite may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Focus Graphite and Air Liquide

The main advantage of trading using opposite Focus Graphite and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Graphite 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 Focus Graphite 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.