Correlation Between EssilorLuxottica and Spineguard

Can any of the company-specific risk be diversified away by investing in both EssilorLuxottica and Spineguard 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 Spineguard 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 Spineguard, you can compare the effects of market volatilities on EssilorLuxottica and Spineguard 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 Spineguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of EssilorLuxottica and Spineguard.

Diversification Opportunities for EssilorLuxottica and Spineguard

-0.35

Correlation Coefficient

EssilorLuxottica  Spineguard

Very good diversification

The 3 months correlation between EssilorLuxottica and Spineguard is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding EssilorLuxottica S A and Spineguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spineguard 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 Spineguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spineguard has no effect on the direction of EssilorLuxottica i.e., EssilorLuxottica and Spineguard go up and down completely randomly.

Pair Corralation between EssilorLuxottica and Spineguard

Assuming the 90 days horizon EssilorLuxottica S A is expected to generate 0.35 times more return on investment than Spineguard. However, EssilorLuxottica S A is 2.9 times less risky than Spineguard. It trades about 0.15 of its potential returns per unit of risk. Spineguard is currently generating about -0.14 per unit of risk. If you would invest  23,230  in EssilorLuxottica S A on December 30, 2024 and sell it today you would earn a total of  3,430  from holding EssilorLuxottica S A or generate 14.77% return on investment over 90 days.

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

EssilorLuxottica S A  vs.  Spineguard

EssilorLuxottica S

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica S A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EssilorLuxottica sustained solid returns over the last few months and may actually be approaching a breakup point.

Spineguard

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spineguard 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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with EssilorLuxottica and Spineguard

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

The idea behind EssilorLuxottica S A and Spineguard 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.