Correlation Between LOréal SA and Kimberly-Clark

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

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

Diversification Opportunities for LOréal SA and Kimberly-Clark

0.59

Correlation Coefficient

LOréal SA  Kimberly-Clark

Very weak diversification

The 3 months correlation between LOréal and Kimberly-Clark is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and Kimberly Clark de Mexico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark de 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 Kimberly-Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark de has no effect on the direction of LOréal SA i.e., LOréal SA and Kimberly-Clark go up and down completely randomly.

Pair Corralation between LOréal SA and Kimberly-Clark

Assuming the 90 days horizon LOréal SA is expected to generate 2.3 times less return on investment than Kimberly-Clark. In addition to that, LOréal SA is 1.51 times more volatile than Kimberly Clark de Mexico. It trades about 0.05 of its total potential returns per unit of risk. Kimberly Clark de Mexico is currently generating about 0.16 per unit of volatility. If you would invest  706.00  in Kimberly Clark de Mexico on December 28, 2024 and sell it today you would earn a total of  117.00  from holding Kimberly Clark de Mexico or generate 16.57% return on investment over 90 days.

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

LOral SA  vs.  Kimberly Clark de Mexico

LOréal SA

Risk-Adjusted Performance

Insignificant

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

Kimberly Clark de

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark de Mexico are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Kimberly-Clark showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LOréal SA and Kimberly-Clark

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

The idea behind LOral SA and Kimberly Clark de Mexico 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.