Correlation Between Air Liquide and Johnson Matthey

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

Diversification Opportunities for Air Liquide and Johnson Matthey

0.84

Correlation Coefficient

Air Liquide  Johnson Matthey

Very poor diversification

The 3 months correlation between Air and Johnson is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey 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 Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of Air Liquide i.e., Air Liquide and Johnson Matthey go up and down completely randomly.

Pair Corralation between Air Liquide and Johnson Matthey

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.52 times more return on investment than Johnson Matthey. However, Air Liquide SA is 1.94 times less risky than Johnson Matthey. It trades about -0.16 of its potential returns per unit of risk. Johnson Matthey PLC is currently generating about -0.11 per unit of risk. If you would invest  3,785  in Air Liquide SA on September 14, 2024 and sell it today you would lose (435.00) from holding Air Liquide SA or give up 11.49% of portfolio value over 90 days.

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

Air Liquide SA  vs.  Johnson Matthey 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 weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Johnson Matthey PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Matthey PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Air Liquide and Johnson Matthey

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

The idea behind Air Liquide SA and Johnson Matthey 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 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..