Correlation Between LOréal SA and LOral SA

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

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

Diversification Opportunities for LOréal SA and LOral SA

0.98

Correlation Coefficient

LOréal SA  LOral SA

Almost no diversification

The 3 months correlation between LOréal and LOral is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOral SA and LOréal SA 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 LOral SA 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 LOréal SA i.e., LOréal SA and LOral SA go up and down completely randomly.

Pair Corralation between LOréal SA and LOral SA

Assuming the 90 days trading horizon LOral SA is expected to generate 1.0 times more return on investment than LOral SA. However, LOréal SA is 1.0 times more volatile than LOral SA. It trades about 0.02 of its potential returns per unit of risk. LOral SA is currently generating about 0.02 per unit of risk. If you would invest  34,145  in LOral SA on December 30, 2024 and sell it today you would earn a total of  360.00  from holding LOral SA or generate 1.05% return on investment over 90 days.

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

LOral SA  vs.  LOral SA

LOréal SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LOral SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LOréal SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

LOral SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LOral SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LOral SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LOréal SA and LOral SA

The main advantage of trading using opposite LOréal SA and LOral SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOréal SA 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 LOral SA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.