Correlation Between Stradim Espace and LOreal SA

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

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

Diversification Opportunities for Stradim Espace and LOreal SA

0.3

Correlation Coefficient

Stradim Espace  LOreal SA

Weak diversification

The 3 months correlation between Stradim and LOreal is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Stradim Espace Finances and LOreal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal SA and Stradim Espace 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 Stradim Espace Finances are associated (or correlated) with LOreal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal SA has no effect on the direction of Stradim Espace i.e., Stradim Espace and LOreal SA go up and down completely randomly.

Pair Corralation between Stradim Espace and LOreal SA

Assuming the 90 days trading horizon Stradim Espace Finances is expected to under-perform the LOreal SA. In addition to that, Stradim Espace is 3.47 times more volatile than LOreal SA. It trades about -0.04 of its total potential returns per unit of risk. LOreal SA is currently generating about 0.05 per unit of volatility. If you would invest  33,370  in LOreal SA on September 24, 2024 and sell it today you would earn a total of  325.00  from holding LOreal SA or generate 0.97% return on investment over 90 days.

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

Stradim Espace Finances  vs.  LOreal SA

Stradim Espace Finances

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stradim Espace Finances has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Stradim Espace is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

LOreal SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOreal SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Stradim Espace and LOreal SA

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

The idea behind Stradim Espace Finances and LOreal 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.