Correlation Between Global Lights and LAir Liquide

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

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

Diversification Opportunities for Global Lights and LAir Liquide

-0.79

Correlation Coefficient

Global Lights  LAir Liquide

Pay attention - limited upside

The 3 months correlation between Global and LAir is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Global Lights Acquisition 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 Global Lights 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 Global Lights Acquisition 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 Global Lights i.e., Global Lights and LAir Liquide go up and down completely randomly.

Pair Corralation between Global Lights and LAir Liquide

Assuming the 90 days horizon Global Lights Acquisition is expected to under-perform the LAir Liquide. But the stock apears to be less risky and, when comparing its historical volatility, Global Lights Acquisition is 16.14 times less risky than LAir Liquide. The stock trades about -0.22 of its potential returns per unit of risk. The LAir Liquide SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  16,714  in LAir Liquide SA on October 11, 2024 and sell it today you would lose (39.00) from holding LAir Liquide SA or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Global Lights Acquisition  vs.  LAir Liquide SA

Global Lights Acquisition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Lights Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Global Lights is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Global Lights and LAir Liquide

The main advantage of trading using opposite Global Lights and LAir Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Lights 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 Global Lights Acquisition 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.