Correlation Between REVO INSURANCE and LOREAL ADR

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

By analyzing existing cross correlation between REVO INSURANCE SPA and LOREAL ADR 15EO, you can compare the effects of market volatilities on REVO INSURANCE and LOREAL ADR 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 REVO INSURANCE with a short position of LOREAL ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of REVO INSURANCE and LOREAL ADR.

Diversification Opportunities for REVO INSURANCE and LOREAL ADR

0.31

Correlation Coefficient

REVO INSURANCE  LOREAL ADR

Weak diversification

The 3 months correlation between REVO and LOREAL is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding REVO INSURANCE SPA and LOREAL ADR 15EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOREAL ADR 15EO and REVO INSURANCE 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 REVO INSURANCE SPA are associated (or correlated) with LOREAL ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOREAL ADR 15EO has no effect on the direction of REVO INSURANCE i.e., REVO INSURANCE and LOREAL ADR go up and down completely randomly.

Pair Corralation between REVO INSURANCE and LOREAL ADR

Assuming the 90 days horizon REVO INSURANCE SPA is expected to generate 1.95 times more return on investment than LOREAL ADR. However, REVO INSURANCE is 1.95 times more volatile than LOREAL ADR 15EO. It trades about 0.04 of its potential returns per unit of risk. LOREAL ADR 15EO is currently generating about 0.01 per unit of risk. If you would invest  1,165  in REVO INSURANCE SPA on December 28, 2024 and sell it today you would earn a total of  55.00  from holding REVO INSURANCE SPA or generate 4.72% return on investment over 90 days.

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

REVO INSURANCE SPA  vs.  LOREAL ADR 15EO

REVO INSURANCE SPA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REVO INSURANCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

LOREAL ADR 15EO

Risk-Adjusted Performance

Very Weak

Over the last 90 days LOREAL ADR 15EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LOREAL ADR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with REVO INSURANCE and LOREAL ADR

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

The idea behind REVO INSURANCE SPA and LOREAL ADR 15EO 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.