Correlation Between Essilor International and Occidental

Can any of the company-specific risk be diversified away by investing in both Essilor International and Occidental 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 Occidental 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 Occidental Petroleum 44, you can compare the effects of market volatilities on Essilor International and Occidental 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 Occidental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essilor International and Occidental.

Diversification Opportunities for Essilor International and Occidental

-0.19

Correlation Coefficient

Essilor International  Occidental

Good diversification

The 3 months correlation between Essilor and Occidental is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA and Occidental Petroleum 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Essilor International i.e., Essilor International and Occidental go up and down completely randomly.

Pair Corralation between Essilor International and Occidental

Assuming the 90 days horizon Essilor International is expected to generate 2.19 times less return on investment than Occidental. But when comparing it to its historical volatility, Essilor International SA is 3.45 times less risky than Occidental. It trades about 0.09 of its potential returns per unit of risk. Occidental Petroleum 44 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,439  in Occidental Petroleum 44 on October 22, 2024 and sell it today you would earn a total of  490.00  from holding Occidental Petroleum 44 or generate 6.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.05%
Values	Daily Returns

Essilor International SA  vs.  Occidental Petroleum 44

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.

Occidental Petroleum

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum 44 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Occidental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Essilor International and Occidental

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

The idea behind Essilor International SA and Occidental Petroleum 44 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..