Correlation Between AIR LIQUIDE and AUST AGRICULTURAL

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

By analyzing existing cross correlation between AIR LIQUIDE ADR and AUST AGRICULTURAL, you can compare the effects of market volatilities on AIR LIQUIDE and AUST AGRICULTURAL 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 AUST AGRICULTURAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR LIQUIDE and AUST AGRICULTURAL.

Diversification Opportunities for AIR LIQUIDE and AUST AGRICULTURAL

0.15

Correlation Coefficient

AIR LIQUIDE  AUST AGRICULTURAL

Average diversification

The 3 months correlation between AIR and AUST is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding AIR LIQUIDE ADR and AUST AGRICULTURAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUST AGRICULTURAL 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 ADR are associated (or correlated) with AUST AGRICULTURAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUST AGRICULTURAL has no effect on the direction of AIR LIQUIDE i.e., AIR LIQUIDE and AUST AGRICULTURAL go up and down completely randomly.

Pair Corralation between AIR LIQUIDE and AUST AGRICULTURAL

Assuming the 90 days trading horizon AIR LIQUIDE ADR is expected to generate 0.46 times more return on investment than AUST AGRICULTURAL. However, AIR LIQUIDE ADR is 2.15 times less risky than AUST AGRICULTURAL. It trades about -0.14 of its potential returns per unit of risk. AUST AGRICULTURAL is currently generating about -0.21 per unit of risk. If you would invest  3,640  in AIR LIQUIDE ADR on March 21, 2025 and sell it today you would lose (80.00) from holding AIR LIQUIDE ADR or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

AIR LIQUIDE ADR  vs.  AUST AGRICULTURAL

AIR LIQUIDE ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIR LIQUIDE ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, AIR LIQUIDE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AUST AGRICULTURAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days AUST AGRICULTURAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with AIR LIQUIDE and AUST AGRICULTURAL

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

The idea behind AIR LIQUIDE ADR and AUST AGRICULTURAL 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.