Correlation Between Essilor International and Inter Parfums

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

Diversification Opportunities for Essilor International and Inter Parfums

0.14

Correlation Coefficient

Essilor International  Inter Parfums

Average diversification

The 3 months correlation between Essilor and Inter is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums 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 Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Essilor International i.e., Essilor International and Inter Parfums go up and down completely randomly.

Pair Corralation between Essilor International and Inter Parfums

Assuming the 90 days horizon Essilor International SA is expected to generate 0.71 times more return on investment than Inter Parfums. However, Essilor International SA is 1.42 times less risky than Inter Parfums. It trades about 0.21 of its potential returns per unit of risk. Inter Parfums is currently generating about -0.05 per unit of risk. If you would invest  12,059  in Essilor International SA on December 21, 2024 and sell it today you would earn a total of  2,335  from holding Essilor International SA or generate 19.36% return on investment over 90 days.

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

Essilor International SA  vs.  Inter Parfums

Essilor International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Essilor International SA are ranked lower than 16 (%) 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.

Inter Parfums

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inter Parfums has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Essilor International and Inter Parfums

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

The idea behind Essilor International SA and Inter Parfums 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.