Correlation Between L’Oreal Co and Danone PK

Can any of the company-specific risk be diversified away by investing in both L’Oreal Co and Danone PK 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 L’Oreal Co and Danone PK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LOreal Co ADR and Danone PK, you can compare the effects of market volatilities on L’Oreal Co and Danone PK 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 L’Oreal Co with a short position of Danone PK. Check out your portfolio center. Please also check ongoing floating volatility patterns of L’Oreal Co and Danone PK.

Diversification Opportunities for L’Oreal Co and Danone PK

0.0

Correlation Coefficient

L’Oreal Co  Danone PK

Pay attention - limited upside

The 3 months correlation between L’Oreal and Danone is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LOreal Co ADR and Danone PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone PK and L’Oreal Co 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 LOreal Co ADR are associated (or correlated) with Danone PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone PK has no effect on the direction of L’Oreal Co i.e., L’Oreal Co and Danone PK go up and down completely randomly.

Pair Corralation between L’Oreal Co and Danone PK

If you would invest  7,025  in LOreal Co ADR on December 30, 2024 and sell it today you would earn a total of  420.00  from holding LOreal Co ADR or generate 5.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LOreal Co ADR  vs.  Danone PK

LOreal Co ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LOreal Co ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, L’Oreal Co may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Danone PK

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danone PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Danone PK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with L’Oreal Co and Danone PK

The main advantage of trading using opposite L’Oreal Co and Danone PK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L’Oreal Co position performs unexpectedly, Danone PK 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 Danone PK will offset losses from the drop in Danone PK's long position.

The idea behind LOreal Co ADR and Danone PK 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..