Correlation Between Linde Plc and Cabot

Can any of the company-specific risk be diversified away by investing in both Linde Plc and Cabot 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 Cabot 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 Cabot, you can compare the effects of market volatilities on Linde Plc and Cabot 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 Cabot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linde Plc and Cabot.

Diversification Opportunities for Linde Plc and Cabot

-0.72

Correlation Coefficient

Linde Plc  Cabot

Pay attention - limited upside

The 3 months correlation between Linde and Cabot is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc Ordinary and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot 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 Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Linde Plc i.e., Linde Plc and Cabot go up and down completely randomly.

Pair Corralation between Linde Plc and Cabot

Considering the 90-day investment horizon Linde plc Ordinary is expected to generate 0.59 times more return on investment than Cabot. However, Linde plc Ordinary is 1.71 times less risky than Cabot. It trades about 0.16 of its potential returns per unit of risk. Cabot is currently generating about -0.08 per unit of risk. If you would invest  42,157  in Linde plc Ordinary on December 27, 2024 and sell it today you would earn a total of  3,986  from holding Linde plc Ordinary or generate 9.46% return on investment over 90 days.

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

Linde plc Ordinary  vs.  Cabot

Linde plc Ordinary

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Linde plc Ordinary are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Linde Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers 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 Cabot

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

The idea behind Linde plc Ordinary and Cabot 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.