Correlation Between LAir Liquide and FEMALE HEALTH
Can any of the company-specific risk be diversified away by investing in both LAir Liquide and FEMALE HEALTH 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 LAir Liquide and FEMALE HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAir Liquide SA and FEMALE HEALTH, you can compare the effects of market volatilities on LAir Liquide and FEMALE HEALTH 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 LAir Liquide with a short position of FEMALE HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and FEMALE HEALTH.
Diversification Opportunities for LAir Liquide and FEMALE HEALTH
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LAir and FEMALE is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and FEMALE HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEMALE HEALTH and LAir Liquide 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 LAir Liquide SA are associated (or correlated) with FEMALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEMALE HEALTH has no effect on the direction of LAir Liquide i.e., LAir Liquide and FEMALE HEALTH go up and down completely randomly.
Pair Corralation between LAir Liquide and FEMALE HEALTH
Assuming the 90 days trading horizon LAir Liquide is expected to generate 2.37 times less return on investment than FEMALE HEALTH. But when comparing it to its historical volatility, LAir Liquide SA is 5.33 times less risky than FEMALE HEALTH. It trades about 0.02 of its potential returns per unit of risk. FEMALE HEALTH is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 92.00 in FEMALE HEALTH on October 1, 2024 and sell it today you would lose (27.00) from holding FEMALE HEALTH or give up 29.35% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
LAir Liquide SA vs. FEMALE HEALTH
Performance |
Timeline |
LAir Liquide SA |
FEMALE HEALTH |
LAir Liquide and FEMALE HEALTH Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LAir Liquide and FEMALE HEALTH
The main advantage of trading using opposite LAir Liquide and FEMALE HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide position performs unexpectedly, FEMALE HEALTH 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 FEMALE HEALTH will offset losses from the drop in FEMALE HEALTH's long position.LAir Liquide vs. Apple Inc | ||
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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