Correlation Between Compagnie and Linde PLC

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

By analyzing existing cross correlation between Compagnie de Saint Gobain and Linde PLC, you can compare the effects of market volatilities on Compagnie 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 Compagnie with a short position of Linde PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Linde PLC.

Diversification Opportunities for Compagnie and Linde PLC

-0.3

Correlation Coefficient

Compagnie  Linde PLC

Very good diversification

The 3 months correlation between Compagnie and Linde is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Linde PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde PLC and Compagnie 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 Compagnie de Saint Gobain 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 Compagnie i.e., Compagnie and Linde PLC go up and down completely randomly.

Pair Corralation between Compagnie and Linde PLC

Assuming the 90 days horizon Compagnie de Saint Gobain is expected to generate 1.6 times more return on investment than Linde PLC. However, Compagnie is 1.6 times more volatile than Linde PLC. It trades about 0.05 of its potential returns per unit of risk. Linde PLC is currently generating about -0.09 per unit of risk. If you would invest  8,230  in Compagnie de Saint Gobain on September 23, 2024 and sell it today you would earn a total of  342.00  from holding Compagnie de Saint Gobain or generate 4.16% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Linde PLC

Compagnie de Saint

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. In spite of comparatively stable basic indicators, Linde PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Compagnie and Linde PLC

The main advantage of trading using opposite Compagnie and Linde PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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 Compagnie de Saint Gobain 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.