Correlation Between LOreal Co and V

Can any of the company-specific risk be diversified away by investing in both LOreal Co and V 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 LOreal Co and V 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 V Group, you can compare the effects of market volatilities on LOreal Co and V 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 LOreal Co with a short position of V. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOreal Co and V.

Diversification Opportunities for LOreal Co and V

0.0

Correlation Coefficient

LOreal Co  V

Pay attention - limited upside

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

Pair Corralation between LOreal Co and V

Assuming the 90 days horizon LOreal Co ADR is expected to generate 0.16 times more return on investment than V. However, LOreal Co ADR is 6.35 times less risky than V. It trades about -0.09 of its potential returns per unit of risk. V Group is currently generating about -0.13 per unit of risk. If you would invest  8,167  in LOreal Co ADR on September 14, 2024 and sell it today you would lose (1,002) from holding LOreal Co ADR or give up 12.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

LOreal Co ADR  vs.  V Group

LOreal Co ADR

Risk-Adjusted Performance

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Very Weak

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

V Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days V Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LOreal Co and V

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

The idea behind LOreal Co ADR and V Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .