Correlation Between AIR LIQUIDE and Kaiser Aluminum

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

Diversification Opportunities for AIR LIQUIDE and Kaiser Aluminum

0.02

Correlation Coefficient

AIR LIQUIDE  Kaiser Aluminum

Significant diversification

The 3 months correlation between AIR and Kaiser is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding AIR LIQUIDE ADR and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of AIR LIQUIDE i.e., AIR LIQUIDE and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between AIR LIQUIDE and Kaiser Aluminum

Assuming the 90 days trading horizon AIR LIQUIDE is expected to generate 105.63 times less return on investment than Kaiser Aluminum. But when comparing it to its historical volatility, AIR LIQUIDE ADR is 1.9 times less risky than Kaiser Aluminum. It trades about 0.01 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  5,132  in Kaiser Aluminum on April 24, 2025 and sell it today you would earn a total of  2,668  from holding Kaiser Aluminum or generate 51.99% return on investment over 90 days.

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

AIR LIQUIDE ADR  vs.  Kaiser Aluminum

AIR LIQUIDE ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIR LIQUIDE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Kaiser Aluminum

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kaiser Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIR LIQUIDE and Kaiser Aluminum

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

The idea behind AIR LIQUIDE ADR and Kaiser Aluminum 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 the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.