Correlation Between ICeram SA and EssilorLuxottica

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

By analyzing existing cross correlation between ICeram SA and EssilorLuxottica S A, you can compare the effects of market volatilities on ICeram SA and EssilorLuxottica 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 ICeram SA with a short position of EssilorLuxottica. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICeram SA and EssilorLuxottica.

Diversification Opportunities for ICeram SA and EssilorLuxottica

-0.69

Correlation Coefficient

ICeram SA  EssilorLuxottica

Excellent diversification

The 3 months correlation between ICeram and EssilorLuxottica is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding ICeram SA and EssilorLuxottica S A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica S and ICeram SA 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 ICeram SA are associated (or correlated) with EssilorLuxottica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EssilorLuxottica S has no effect on the direction of ICeram SA i.e., ICeram SA and EssilorLuxottica go up and down completely randomly.

Pair Corralation between ICeram SA and EssilorLuxottica

Assuming the 90 days trading horizon ICeram SA is expected to under-perform the EssilorLuxottica. In addition to that, ICeram SA is 2.99 times more volatile than EssilorLuxottica S A. It trades about -0.07 of its total potential returns per unit of risk. EssilorLuxottica S A is currently generating about 0.1 per unit of volatility. If you would invest  21,550  in EssilorLuxottica S A on September 3, 2024 and sell it today you would earn a total of  1,430  from holding EssilorLuxottica S A or generate 6.64% return on investment over 90 days.

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

ICeram SA  vs.  EssilorLuxottica S A

ICeram SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICeram SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

EssilorLuxottica S

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica S A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EssilorLuxottica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ICeram SA and EssilorLuxottica

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

The idea behind ICeram SA and EssilorLuxottica S A 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.