Correlation Between EssilorLuxottica and Nextedia

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

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

Diversification Opportunities for EssilorLuxottica and Nextedia

-0.48

Correlation Coefficient

EssilorLuxottica  Nextedia

Very good diversification

The 3 months correlation between EssilorLuxottica and Nextedia is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding EssilorLuxottica S A and Nextedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextedia and EssilorLuxottica 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 EssilorLuxottica S A are associated (or correlated) with Nextedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextedia has no effect on the direction of EssilorLuxottica i.e., EssilorLuxottica and Nextedia go up and down completely randomly.

Pair Corralation between EssilorLuxottica and Nextedia

Assuming the 90 days horizon EssilorLuxottica S A is expected to generate 0.39 times more return on investment than Nextedia. However, EssilorLuxottica S A is 2.56 times less risky than Nextedia. It trades about 0.1 of its potential returns per unit of risk. Nextedia is currently generating about -0.14 per unit of risk. If you would invest  23,130  in EssilorLuxottica S A on October 12, 2024 and sell it today you would earn a total of  380.00  from holding EssilorLuxottica S A or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

EssilorLuxottica S A  vs.  Nextedia

EssilorLuxottica S

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica S A are ranked lower than 12 (%) 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.

Nextedia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EssilorLuxottica and Nextedia

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

The idea behind EssilorLuxottica S A and Nextedia 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.