Correlation Between Kimberly Clark and LOral SA

Can any of the company-specific risk be diversified away by investing in both Kimberly Clark and LOral SA 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 Kimberly Clark and LOral SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kimberly Clark de Mexico and LOral SA, you can compare the effects of market volatilities on Kimberly Clark and LOral SA 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 Kimberly Clark with a short position of LOral SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kimberly Clark and LOral SA.

Diversification Opportunities for Kimberly Clark and LOral SA

0.91

Correlation Coefficient

Kimberly Clark  LOral SA

Almost no diversification

The 3 months correlation between Kimberly and LOral is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark de Mexico and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOral SA and Kimberly Clark 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 Kimberly Clark de Mexico are associated (or correlated) with LOral SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOral SA has no effect on the direction of Kimberly Clark i.e., Kimberly Clark and LOral SA go up and down completely randomly.

Pair Corralation between Kimberly Clark and LOral SA

Assuming the 90 days horizon Kimberly Clark de Mexico is expected to generate 0.69 times more return on investment than LOral SA. However, Kimberly Clark de Mexico is 1.44 times less risky than LOral SA. It trades about -0.07 of its potential returns per unit of risk. LOral SA is currently generating about -0.06 per unit of risk. If you would invest  785.00  in Kimberly Clark de Mexico on September 16, 2024 and sell it today you would lose (69.00) from holding Kimberly Clark de Mexico or give up 8.79% of portfolio value over 90 days.

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

Kimberly Clark de Mexico  vs.  LOral SA

Kimberly Clark de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark de Mexico has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

LOral SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOral SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Kimberly Clark and LOral SA

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

The idea behind Kimberly Clark de Mexico and LOral SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..