Correlation Between VIVA WINE and Air Liquide

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Can any of the company-specific risk be diversified away by investing in both VIVA WINE 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 VIVA WINE and Air Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VIVA WINE GROUP and Air Liquide SA, you can compare the effects of market volatilities on VIVA WINE 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 VIVA WINE with a short position of Air Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIVA WINE and Air Liquide.

Diversification Opportunities for VIVA WINE and Air Liquide

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between VIVA and Air is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding VIVA WINE GROUP 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 VIVA WINE 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 VIVA WINE GROUP 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 VIVA WINE i.e., VIVA WINE and Air Liquide go up and down completely randomly.

Pair Corralation between VIVA WINE and Air Liquide

Assuming the 90 days horizon VIVA WINE is expected to generate 1.11 times less return on investment than Air Liquide. In addition to that, VIVA WINE is 1.51 times more volatile than Air Liquide SA. It trades about 0.13 of its total potential returns per unit of risk. Air Liquide SA is currently generating about 0.22 per unit of volatility. If you would invest  15,422  in Air Liquide SA on December 21, 2024 and sell it today you would earn a total of  2,336  from holding Air Liquide SA or generate 15.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

VIVA WINE GROUP  vs.  Air Liquide SA

 Performance 
       Timeline  
VIVA WINE GROUP 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in VIVA WINE GROUP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VIVA WINE reported solid returns over the last few months and may actually be approaching a breakup point.
Air Liquide SA 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Air Liquide unveiled solid returns over the last few months and may actually be approaching a breakup point.

VIVA WINE and Air Liquide Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VIVA WINE and Air Liquide

The main advantage of trading using opposite VIVA WINE and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIVA WINE 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 VIVA WINE GROUP 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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