Correlation Between Ingersoll Rand and Air France-KLM

Can any of the company-specific risk be diversified away by investing in both Ingersoll Rand and Air France-KLM 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 Ingersoll Rand and Air France-KLM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ingersoll Rand and Air France KLM SA, you can compare the effects of market volatilities on Ingersoll Rand and Air France-KLM 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 Ingersoll Rand with a short position of Air France-KLM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingersoll Rand and Air France-KLM.

Diversification Opportunities for Ingersoll Rand and Air France-KLM

0.22

Correlation Coefficient

Ingersoll Rand  Air France-KLM

Modest diversification

The 3 months correlation between Ingersoll and Air is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ingersoll Rand and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM and Ingersoll Rand 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 Ingersoll Rand are associated (or correlated) with Air France-KLM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Ingersoll Rand i.e., Ingersoll Rand and Air France-KLM go up and down completely randomly.

Pair Corralation between Ingersoll Rand and Air France-KLM

Allowing for the 90-day total investment horizon Ingersoll Rand is expected to generate 1.32 times less return on investment than Air France-KLM. But when comparing it to its historical volatility, Ingersoll Rand is 1.26 times less risky than Air France-KLM. It trades about 0.05 of its potential returns per unit of risk. Air France KLM SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,092  in Air France KLM SA on March 14, 2024 and sell it today you would earn a total of  57.00  from holding Air France KLM SA or generate 5.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Ingersoll Rand  vs.  Air France KLM SA

Ingersoll Rand

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ingersoll Rand are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Ingersoll Rand is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Air France KLM

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air France KLM SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Air France-KLM may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Ingersoll Rand and Air France-KLM

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

The idea behind Ingersoll Rand and Air France KLM SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.