Correlation Between AGF Management and AIR LIQUIDE

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

By analyzing existing cross correlation between AGF Management Limited and AIR LIQUIDE ADR, you can compare the effects of market volatilities on AGF Management 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 AGF Management with a short position of AIR LIQUIDE. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGF Management and AIR LIQUIDE.

Diversification Opportunities for AGF Management and AIR LIQUIDE

-0.67

Correlation Coefficient

AGF Management  AIR LIQUIDE

Excellent diversification

The 3 months correlation between AGF and AIR is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited and AIR LIQUIDE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR LIQUIDE ADR and AGF Management 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 AGF Management Limited 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 ADR has no effect on the direction of AGF Management i.e., AGF Management and AIR LIQUIDE go up and down completely randomly.

Pair Corralation between AGF Management and AIR LIQUIDE

Assuming the 90 days horizon AGF Management Limited is expected to under-perform the AIR LIQUIDE. In addition to that, AGF Management is 1.28 times more volatile than AIR LIQUIDE ADR. It trades about -0.14 of its total potential returns per unit of risk. AIR LIQUIDE ADR is currently generating about -0.03 per unit of volatility. If you would invest  3,100  in AIR LIQUIDE ADR on September 22, 2024 and sell it today you would lose (20.00) from holding AIR LIQUIDE ADR or give up 0.65% of portfolio value over 90 days.

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

AGF Management Limited  vs.  AIR LIQUIDE ADR

AGF Management

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AGF Management reported solid returns over the last few months and may actually be approaching a breakup point.

AIR LIQUIDE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIR LIQUIDE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AGF Management and AIR LIQUIDE

The main advantage of trading using opposite AGF Management and AIR LIQUIDE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGF Management 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 AGF Management Limited and AIR LIQUIDE ADR 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.