Correlation Between Air Liquide and Sincerity Applied

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

Diversification Opportunities for Air Liquide and Sincerity Applied

0.29

Correlation Coefficient

Air Liquide  Sincerity Applied

Modest diversification

The 3 months correlation between Air and Sincerity is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Sincerity Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sincerity Applied 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 Sincerity Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sincerity Applied has no effect on the direction of Air Liquide i.e., Air Liquide and Sincerity Applied go up and down completely randomly.

Pair Corralation between Air Liquide and Sincerity Applied

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.03 times more return on investment than Sincerity Applied. However, Air Liquide SA is 38.47 times less risky than Sincerity Applied. It trades about -0.18 of its potential returns per unit of risk. Sincerity Applied Materials is currently generating about -0.13 per unit of risk. If you would invest  4,144  in Air Liquide SA on January 30, 2024 and sell it today you would lose (177.00) from holding Air Liquide SA or give up 4.27% of portfolio value over 90 days.

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

Air Liquide SA  vs.  Sincerity Applied Materials

Air Liquide SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Air Liquide may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Sincerity Applied

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sincerity Applied Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Sincerity Applied exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Liquide and Sincerity Applied

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

The idea behind Air Liquide SA and Sincerity Applied Materials 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.