Correlation Between Linde Plc and Avantor

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

By analyzing existing cross correlation between Linde plc Ordinary and Avantor, you can compare the effects of market volatilities on Linde Plc and Avantor 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 Avantor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linde Plc and Avantor.

Diversification Opportunities for Linde Plc and Avantor

0.66

Correlation Coefficient

Linde Plc  Avantor

Poor diversification

The 3 months correlation between Linde and Avantor is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc Ordinary and Avantor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantor 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 Ordinary are associated (or correlated) with Avantor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantor has no effect on the direction of Linde Plc i.e., Linde Plc and Avantor go up and down completely randomly.

Pair Corralation between Linde Plc and Avantor

Considering the 90-day investment horizon Linde plc Ordinary is expected to generate 0.61 times more return on investment than Avantor. However, Linde plc Ordinary is 1.64 times less risky than Avantor. It trades about -0.04 of its potential returns per unit of risk. Avantor is currently generating about -0.18 per unit of risk. If you would invest  47,266  in Linde plc Ordinary on September 3, 2024 and sell it today you would lose (1,167) from holding Linde plc Ordinary or give up 2.47% of portfolio value over 90 days.

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

Linde plc Ordinary  vs.  Avantor

Linde plc Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Linde Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Avantor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Linde Plc and Avantor

The main advantage of trading using opposite Linde Plc and Avantor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linde Plc position performs unexpectedly, Avantor 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 Avantor will offset losses from the drop in Avantor's long position.

The idea behind Linde plc Ordinary and Avantor 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.