Correlation Between Dassault Systemes and EssilorLuxottica

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

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

Diversification Opportunities for Dassault Systemes and EssilorLuxottica

0.4

Correlation Coefficient

Dassault Systemes  EssilorLuxottica

Very weak diversification

The 3 months correlation between Dassault and EssilorLuxottica is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systemes SE and EssilorLuxottica S A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica S and Dassault Systemes 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 Dassault Systemes SE 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 Dassault Systemes i.e., Dassault Systemes and EssilorLuxottica go up and down completely randomly.

Pair Corralation between Dassault Systemes and EssilorLuxottica

Assuming the 90 days trading horizon Dassault Systemes is expected to generate 2.03 times less return on investment than EssilorLuxottica. In addition to that, Dassault Systemes is 1.54 times more volatile than EssilorLuxottica S A. It trades about 0.06 of its total potential returns per unit of risk. EssilorLuxottica S A is currently generating about 0.19 per unit of volatility. If you would invest  21,760  in EssilorLuxottica S A on October 20, 2024 and sell it today you would earn a total of  2,650  from holding EssilorLuxottica S A or generate 12.18% return on investment over 90 days.

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

Dassault Systemes SE  vs.  EssilorLuxottica S A

Dassault Systemes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Systemes SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dassault Systemes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EssilorLuxottica S

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica S A are ranked lower than 14 (%) 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 February 2025.

Pair Trading with Dassault Systemes and EssilorLuxottica

The main advantage of trading using opposite Dassault Systemes and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dassault Systemes 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 Dassault Systemes SE 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.