Correlation Between Linde Plc and PPG Industries

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

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

Diversification Opportunities for Linde Plc and PPG Industries

0.39

Correlation Coefficient

Linde Plc  PPG Industries

Weak diversification

The 3 months correlation between Linde and PPG is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries and Linde Plc 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 Linde plc are associated (or correlated) with PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Linde Plc i.e., Linde Plc and PPG Industries go up and down completely randomly.

Pair Corralation between Linde Plc and PPG Industries

Assuming the 90 days horizon Linde plc is expected to under-perform the PPG Industries. But the stock apears to be less risky and, when comparing its historical volatility, Linde plc is 1.34 times less risky than PPG Industries. The stock trades about -0.08 of its potential returns per unit of risk. The PPG Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11,085  in PPG Industries on September 23, 2024 and sell it today you would earn a total of  320.00  from holding PPG Industries or generate 2.89% return on investment over 90 days.

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

Linde plc  vs.  PPG Industries

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.

PPG Industries

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PPG Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Linde Plc and PPG Industries

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

The idea behind Linde plc and PPG Industries 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.