Correlation Between Linde Plc and RPM International

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

Diversification Opportunities for Linde Plc and RPM International

-0.3

Correlation Coefficient

Linde Plc  RPM International

Very good diversification

The 3 months correlation between Linde and RPM is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc Ordinary and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International 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 RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of Linde Plc i.e., Linde Plc and RPM International go up and down completely randomly.

Pair Corralation between Linde Plc and RPM International

Considering the 90-day investment horizon Linde plc Ordinary is expected to generate 0.72 times more return on investment than RPM International. However, Linde plc Ordinary is 1.39 times less risky than RPM International. It trades about 0.14 of its potential returns per unit of risk. RPM International is currently generating about -0.09 per unit of risk. If you would invest  42,291  in Linde plc Ordinary on December 26, 2024 and sell it today you would earn a total of  3,454  from holding Linde plc Ordinary or generate 8.17% return on investment over 90 days.

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

Linde plc Ordinary  vs.  RPM International

Linde plc Ordinary

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linde plc Ordinary are ranked lower than 11 (%) 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.

RPM International

Risk-Adjusted Performance

Very Weak

Over the last 90 days RPM International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Linde Plc and RPM International

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

The idea behind Linde plc Ordinary and RPM International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.