Correlation Between Thales SA and Air Liquide

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

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

Diversification Opportunities for Thales SA and Air Liquide

0.88

Correlation Coefficient

Thales SA  Air Liquide

Very poor diversification

The 3 months correlation between Thales and Air is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA 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 Thales SA 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 Thales SA 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 Thales SA i.e., Thales SA and Air Liquide go up and down completely randomly.

Pair Corralation between Thales SA and Air Liquide

Assuming the 90 days horizon Thales SA is expected to generate 2.56 times more return on investment than Air Liquide. However, Thales SA is 2.56 times more volatile than Air Liquide SA. It trades about 0.36 of its potential returns per unit of risk. Air Liquide SA is currently generating about 0.2 per unit of risk. If you would invest  13,750  in Thales SA on December 28, 2024 and sell it today you would earn a total of  11,250  from holding Thales SA or generate 81.82% return on investment over 90 days.

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

Thales SA  vs.  Air Liquide SA

Thales SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thales SA are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Thales SA sustained solid returns over the last few months and may actually be approaching a breakup point.

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 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air Liquide sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thales SA and Air Liquide

The main advantage of trading using opposite Thales SA and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thales SA 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 Thales SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.