Correlation Between Eurofins Scientific and EssilorLuxottica

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

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

Diversification Opportunities for Eurofins Scientific and EssilorLuxottica

-0.74

Correlation Coefficient

Eurofins Scientific  EssilorLuxottica

Pay attention - limited upside

The 3 months correlation between Eurofins and EssilorLuxottica is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Eurofins Scientific 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 Eurofins Scientific 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 Eurofins Scientific 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 Eurofins Scientific i.e., Eurofins Scientific and EssilorLuxottica go up and down completely randomly.

Pair Corralation between Eurofins Scientific and EssilorLuxottica

Assuming the 90 days trading horizon Eurofins Scientific SE is expected to generate 1.16 times more return on investment than EssilorLuxottica. However, Eurofins Scientific is 1.16 times more volatile than EssilorLuxottica S A. It trades about 0.11 of its potential returns per unit of risk. EssilorLuxottica S A is currently generating about -0.09 per unit of risk. If you would invest  4,696  in Eurofins Scientific SE on September 23, 2024 and sell it today you would earn a total of  100.00  from holding Eurofins Scientific SE or generate 2.13% return on investment over 90 days.

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

Eurofins Scientific SE  vs.  EssilorLuxottica S A

Eurofins Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

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

EssilorLuxottica S

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica S A are ranked lower than 15 (%) 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 January 2025.

Pair Trading with Eurofins Scientific and EssilorLuxottica

The main advantage of trading using opposite Eurofins Scientific and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eurofins Scientific 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 Eurofins Scientific 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.