Correlation Between Essilor International and 23291KAH8

Can any of the company-specific risk be diversified away by investing in both Essilor International and 23291KAH8 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 23291KAH8 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 DH EUROPE FINANCE, you can compare the effects of market volatilities on Essilor International and 23291KAH8 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 23291KAH8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essilor International and 23291KAH8.

Diversification Opportunities for Essilor International and 23291KAH8

-0.47

Correlation Coefficient

Essilor International  23291KAH8

Very good diversification

The 3 months correlation between Essilor and 23291KAH8 is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA and DH EUROPE FINANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DH EUROPE FINANCE 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 23291KAH8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DH EUROPE FINANCE has no effect on the direction of Essilor International i.e., Essilor International and 23291KAH8 go up and down completely randomly.

Pair Corralation between Essilor International and 23291KAH8

Assuming the 90 days horizon Essilor International SA is expected to generate 2.99 times more return on investment than 23291KAH8. However, Essilor International is 2.99 times more volatile than DH EUROPE FINANCE. It trades about 0.09 of its potential returns per unit of risk. DH EUROPE FINANCE is currently generating about -0.13 per unit of risk. If you would invest  11,996  in Essilor International SA on October 22, 2024 and sell it today you would earn a total of  614.00  from holding Essilor International SA or generate 5.12% return on investment over 90 days.

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

Essilor International SA  vs.  DH EUROPE FINANCE

Essilor International

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essilor International SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Essilor International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DH EUROPE FINANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DH EUROPE FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 23291KAH8 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Essilor International and 23291KAH8

The main advantage of trading using opposite Essilor International and 23291KAH8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essilor International position performs unexpectedly, 23291KAH8 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 23291KAH8 will offset losses from the drop in 23291KAH8's long position.

The idea behind Essilor International SA and DH EUROPE FINANCE 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.