Correlation Between Clorox and LOral SA

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

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

Diversification Opportunities for Clorox and LOral SA

-0.1

Correlation Coefficient

Clorox  LOral SA

Good diversification

The 3 months correlation between Clorox and LOral is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding The Clorox and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOral SA and Clorox 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 The Clorox are associated (or correlated) with LOral SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOral SA has no effect on the direction of Clorox i.e., Clorox and LOral SA go up and down completely randomly.

Pair Corralation between Clorox and LOral SA

Considering the 90-day investment horizon The Clorox is expected to under-perform the LOral SA. But the stock apears to be less risky and, when comparing its historical volatility, The Clorox is 1.32 times less risky than LOral SA. The stock trades about -0.05 of its potential returns per unit of risk. The LOral SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  35,195  in LOral SA on December 1, 2024 and sell it today you would earn a total of  1,991  from holding LOral SA or generate 5.66% return on investment over 90 days.

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

The Clorox  vs.  LOral SA

Clorox

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Clorox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Clorox is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

LOral SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LOral SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, LOral SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Clorox and LOral SA

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

The idea behind The Clorox and LOral 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.