Correlation Between LOreal SA and Sogeclair

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

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

Diversification Opportunities for LOreal SA and Sogeclair

-0.23

Correlation Coefficient

LOreal SA  Sogeclair

Very good diversification

The 3 months correlation between LOreal and Sogeclair is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA and Sogeclair SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sogeclair SA and LOreal 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 LOreal SA are associated (or correlated) with Sogeclair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sogeclair SA has no effect on the direction of LOreal SA i.e., LOreal SA and Sogeclair go up and down completely randomly.

Pair Corralation between LOreal SA and Sogeclair

Assuming the 90 days horizon LOreal SA is expected to generate 1.83 times less return on investment than Sogeclair. But when comparing it to its historical volatility, LOreal SA is 1.44 times less risky than Sogeclair. It trades about 0.08 of its potential returns per unit of risk. Sogeclair SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,805  in Sogeclair SA on November 29, 2024 and sell it today you would earn a total of  215.00  from holding Sogeclair SA or generate 11.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

LOreal SA  vs.  Sogeclair SA

LOreal SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LOreal SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LOreal SA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Sogeclair SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sogeclair SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Sogeclair reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LOreal SA and Sogeclair

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

The idea behind LOreal SA and Sogeclair 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.