Correlation Between ESSILORLUXOTTICA and ResMed

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

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

Diversification Opportunities for ESSILORLUXOTTICA and ResMed

0.74

Correlation Coefficient

ESSILORLUXOTTICA  ResMed

Poor diversification

The 3 months correlation between ESSILORLUXOTTICA and ResMed is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ESSILORLUXOTTICA 12ON and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of ESSILORLUXOTTICA i.e., ESSILORLUXOTTICA and ResMed go up and down completely randomly.

Pair Corralation between ESSILORLUXOTTICA and ResMed

Assuming the 90 days trading horizon ESSILORLUXOTTICA 12ON is expected to generate 0.58 times more return on investment than ResMed. However, ESSILORLUXOTTICA 12ON is 1.73 times less risky than ResMed. It trades about 0.06 of its potential returns per unit of risk. ResMed Inc is currently generating about 0.02 per unit of risk. If you would invest  8,114  in ESSILORLUXOTTICA 12ON on September 24, 2024 and sell it today you would earn a total of  3,286  from holding ESSILORLUXOTTICA 12ON or generate 40.5% return on investment over 90 days.

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

ESSILORLUXOTTICA 12ON  vs.  ResMed Inc

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

12 of 100

Good

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

ResMed Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ResMed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ESSILORLUXOTTICA and ResMed

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

The idea behind ESSILORLUXOTTICA 12ON and ResMed Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.