Correlation Between AIR LIQUIDE and ARISTOCRAT LEISURE

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

By analyzing existing cross correlation between AIR LIQUIDE ADR and ARISTOCRAT LEISURE, you can compare the effects of market volatilities on AIR LIQUIDE and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR LIQUIDE and ARISTOCRAT LEISURE.

Diversification Opportunities for AIR LIQUIDE and ARISTOCRAT LEISURE

-0.91

Correlation Coefficient

AIR LIQUIDE  ARISTOCRAT LEISURE

Pay attention - limited upside

The 3 months correlation between AIR and ARISTOCRAT is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding AIR LIQUIDE ADR and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ADR are associated (or correlated) with ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of AIR LIQUIDE i.e., AIR LIQUIDE and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between AIR LIQUIDE and ARISTOCRAT LEISURE

Assuming the 90 days trading horizon AIR LIQUIDE ADR is expected to under-perform the ARISTOCRAT LEISURE. But the stock apears to be less risky and, when comparing its historical volatility, AIR LIQUIDE ADR is 1.05 times less risky than ARISTOCRAT LEISURE. The stock trades about -0.18 of its potential returns per unit of risk. The ARISTOCRAT LEISURE is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,583  in ARISTOCRAT LEISURE on October 1, 2024 and sell it today you would earn a total of  577.00  from holding ARISTOCRAT LEISURE or generate 16.1% return on investment over 90 days.

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

AIR LIQUIDE ADR  vs.  ARISTOCRAT LEISURE

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 fragile 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.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIR LIQUIDE and ARISTOCRAT LEISURE

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

The idea behind AIR LIQUIDE ADR and ARISTOCRAT LEISURE 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.