Correlation Between Air Liquide and Linde Plc

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

By analyzing existing cross correlation between Air Liquide SA and Linde plc, you can compare the effects of market volatilities on Air Liquide and Linde Plc 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 Air Liquide with a short position of Linde Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Linde Plc.

Diversification Opportunities for Air Liquide and Linde Plc

0.47

Correlation Coefficient

Air Liquide  Linde Plc

Very weak diversification

The 3 months correlation between Air and Linde is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Linde plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc and Air 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 Air Liquide SA are associated (or correlated) with Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc has no effect on the direction of Air Liquide i.e., Air Liquide and Linde Plc go up and down completely randomly.

Pair Corralation between Air Liquide and Linde Plc

Assuming the 90 days trading horizon Air Liquide SA is expected to under-perform the Linde Plc. But the stock apears to be less risky and, when comparing its historical volatility, Air Liquide SA is 1.08 times less risky than Linde Plc. The stock trades about -0.14 of its potential returns per unit of risk. The Linde plc is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  42,783  in Linde plc on September 23, 2024 and sell it today you would lose (2,343) from holding Linde plc or give up 5.48% of portfolio value over 90 days.

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

Air Liquide SA  vs.  Linde plc

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Linde plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Linde Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Liquide and Linde Plc

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

The idea behind Air Liquide SA and Linde plc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.