Correlation Between LOréal SA and European Wax
Can any of the company-specific risk be diversified away by investing in both LOréal SA and European Wax 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 European Wax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOral SA and European Wax Center, you can compare the effects of market volatilities on LOréal SA and European Wax 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 European Wax. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOréal SA and European Wax.
Diversification Opportunities for LOréal SA and European Wax
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LOréal and European is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and European Wax Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Wax Center 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 European Wax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Wax Center has no effect on the direction of LOréal SA i.e., LOréal SA and European Wax go up and down completely randomly.
Pair Corralation between LOréal SA and European Wax
Assuming the 90 days horizon LOral SA is expected to generate 0.68 times more return on investment than European Wax. However, LOral SA is 1.47 times less risky than European Wax. It trades about 0.04 of its potential returns per unit of risk. European Wax Center is currently generating about -0.17 per unit of risk. If you would invest 35,141 in LOral SA on December 28, 2024 and sell it today you would earn a total of 1,299 from holding LOral SA or generate 3.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
LOral SA vs. European Wax Center
Performance |
Timeline |
LOréal SA |
European Wax Center |
LOréal SA and European Wax Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LOréal SA and European Wax
The main advantage of trading using opposite LOréal SA and European Wax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOréal SA position performs unexpectedly, European Wax 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 European Wax will offset losses from the drop in European Wax's long position.LOréal SA vs. Inter Parfums | LOréal SA vs. European Wax Center | LOréal SA vs. Estee Lauder Companies | LOréal SA vs. Reckitt Benckiser Group |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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