Correlation Between D L and LAir Liquide

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Can any of the company-specific risk be diversified away by investing in both D L and LAir Liquide 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 D L and LAir Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between D L Industries and LAir Liquide Ord, you can compare the effects of market volatilities on D L and LAir Liquide 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 D L with a short position of LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of D L and LAir Liquide.

Diversification Opportunities for D L and LAir Liquide

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between DLNDY and AIQUF is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding D L Industries and LAir Liquide Ord in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide Ord and D L 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 D L Industries are associated (or correlated) with LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide Ord has no effect on the direction of D L i.e., D L and LAir Liquide go up and down completely randomly.

Pair Corralation between D L and LAir Liquide

Assuming the 90 days horizon D L Industries is expected to generate 1.43 times more return on investment than LAir Liquide. However, D L is 1.43 times more volatile than LAir Liquide Ord. It trades about 0.07 of its potential returns per unit of risk. LAir Liquide Ord is currently generating about -0.02 per unit of risk. If you would invest  338.00  in D L Industries on February 18, 2022 and sell it today you would earn a total of  12.00  from holding D L Industries or generate 3.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

D L Industries  vs.  LAir Liquide Ord

 Performance (%) 
      Timeline 
D L Industries 
DLNDY Performance
0 of 100
Over the last 90 days D L Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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.

DLNDY Price Channel

LAir Liquide Ord 
AIQUF Performance
0 of 100
Over the last 90 days LAir Liquide Ord has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, LAir Liquide is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AIQUF Price Channel

D L and LAir Liquide Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with D L and LAir Liquide

The main advantage of trading using opposite D L and LAir Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if D L position performs unexpectedly, LAir Liquide 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 LAir Liquide will offset losses from the drop in LAir Liquide's long position.
The idea behind D L Industries and LAir Liquide Ord 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.
Check out your portfolio center. 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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