Correlation Between Linde PLC and Air Liquide

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

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

Diversification Opportunities for Linde PLC and Air Liquide

0.49

Correlation Coefficient

Linde PLC  Air Liquide

Very weak diversification

The 3 months correlation between Linde and Air is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Linde PLC 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 Linde PLC 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 Linde PLC 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 Linde PLC i.e., Linde PLC and Air Liquide go up and down completely randomly.

Pair Corralation between Linde PLC and Air Liquide

Assuming the 90 days trading horizon Linde PLC is expected to under-perform the Air Liquide. But the stock apears to be less risky and, when comparing its historical volatility, Linde PLC is 1.02 times less risky than Air Liquide. The stock trades about -0.21 of its potential returns per unit of risk. The Air Liquide SA is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  16,928  in Air Liquide SA on September 23, 2024 and sell it today you would lose (1,392) from holding Air Liquide SA or give up 8.22% of portfolio value over 90 days.

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

Linde PLC  vs.  Air Liquide SA

Linde PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Linde PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest fragile performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Linde PLC and Air Liquide

The main advantage of trading using opposite Linde PLC and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linde PLC 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 Linde PLC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.