Correlation Between ESSILORLUXOTTICA and EastGroup Properties

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

By analyzing existing cross correlation between ESSILORLUXOTTICA 12ON and EastGroup Properties, you can compare the effects of market volatilities on ESSILORLUXOTTICA and EastGroup Properties 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 EastGroup Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSILORLUXOTTICA and EastGroup Properties.

Diversification Opportunities for ESSILORLUXOTTICA and EastGroup Properties

0.85

Correlation Coefficient

ESSILORLUXOTTICA  EastGroup Properties

Very poor diversification

The 3 months correlation between ESSILORLUXOTTICA and EastGroup is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ESSILORLUXOTTICA 12ON and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties 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 12ON are associated (or correlated) with EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of ESSILORLUXOTTICA i.e., ESSILORLUXOTTICA and EastGroup Properties go up and down completely randomly.

Pair Corralation between ESSILORLUXOTTICA and EastGroup Properties

Assuming the 90 days trading horizon ESSILORLUXOTTICA 12ON is expected to generate 1.4 times more return on investment than EastGroup Properties. However, ESSILORLUXOTTICA is 1.4 times more volatile than EastGroup Properties. It trades about 0.23 of its potential returns per unit of risk. EastGroup Properties is currently generating about 0.12 per unit of risk. If you would invest  11,300  in ESSILORLUXOTTICA 12ON on December 2, 2024 and sell it today you would earn a total of  2,900  from holding ESSILORLUXOTTICA 12ON or generate 25.66% return on investment over 90 days.

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

ESSILORLUXOTTICA 12ON  vs.  EastGroup Properties

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ESSILORLUXOTTICA 12ON are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, ESSILORLUXOTTICA reported solid returns over the last few months and may actually be approaching a breakup point.

EastGroup Properties

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EastGroup Properties are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EastGroup Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ESSILORLUXOTTICA and EastGroup Properties

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

The idea behind ESSILORLUXOTTICA 12ON and EastGroup Properties 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.