Correlation Between Air Liquide and DL Industries

Can any of the company-specific risk be diversified away by investing in both Air Liquide and DL 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 Air Liquide and DL Industries 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 DL Industries ADR, you can compare the effects of market volatilities on Air Liquide and DL 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 Air Liquide with a short position of DL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and DL Industries.

Diversification Opportunities for Air Liquide and DL Industries

-0.1

Correlation Coefficient

Air Liquide  DL Industries

Good diversification

The 3 months correlation between Air and DLNDY is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and DL Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DL Industries ADR 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 DL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DL Industries ADR has no effect on the direction of Air Liquide i.e., Air Liquide and DL Industries go up and down completely randomly.

Pair Corralation between Air Liquide and DL Industries

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.55 times more return on investment than DL Industries. However, Air Liquide SA is 1.81 times less risky than DL Industries. It trades about 0.04 of its potential returns per unit of risk. DL Industries ADR is currently generating about 0.0 per unit of risk. If you would invest  3,069  in Air Liquide SA on January 24, 2024 and sell it today you would earn a total of  931.00  from holding Air Liquide SA or generate 30.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Air Liquide SA  vs.  DL Industries ADR

Air Liquide SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Air Liquide may actually be approaching a critical reversion point that can send shares even higher in May 2024.

DL Industries ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DL Industries ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Air Liquide and DL Industries

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

The idea behind Air Liquide SA and DL Industries ADR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..