Correlation Between Essilor International and Coloplast A/S

Can any of the company-specific risk be diversified away by investing in both Essilor International and Coloplast A/S 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 Essilor International and Coloplast A/S into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Essilor International and Coloplast A/S

-0.02

Correlation Coefficient

Essilor International  Coloplast A/S

Good diversification

The 3 months correlation between Essilor and Coloplast is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast A/S and Essilor International 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 Essilor International SA are associated (or correlated) with Coloplast A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast A/S has no effect on the direction of Essilor International i.e., Essilor International and Coloplast A/S go up and down completely randomly.

Pair Corralation between Essilor International and Coloplast A/S

Assuming the 90 days horizon Essilor International SA is expected to generate 1.31 times more return on investment than Coloplast A/S. However, Essilor International is 1.31 times more volatile than Coloplast AS. It trades about 0.2 of its potential returns per unit of risk. Coloplast AS is currently generating about -0.06 per unit of risk. If you would invest  12,131  in Essilor International SA on December 30, 2024 and sell it today you would earn a total of  2,293  from holding Essilor International SA or generate 18.9% return on investment over 90 days.

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

Essilor International SA  vs.  Coloplast AS

Essilor International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Essilor International SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Essilor International showed solid returns over the last few months and may actually be approaching a breakup point.

Coloplast A/S

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coloplast AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Coloplast A/S is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Essilor International and Coloplast A/S

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

The idea behind Essilor International SA and Coloplast AS 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.