Correlation Between LOreal SA and Robertet

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

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

Diversification Opportunities for LOreal SA and Robertet

0.59

Correlation Coefficient

LOreal SA  Robertet

Very weak diversification

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

Pair Corralation between LOreal SA and Robertet

Assuming the 90 days horizon LOreal SA is expected to generate 1.13 times more return on investment than Robertet. However, LOreal SA is 1.13 times more volatile than Robertet SA. It trades about 0.2 of its potential returns per unit of risk. Robertet SA is currently generating about -0.02 per unit of risk. If you would invest  32,720  in LOreal SA on September 16, 2024 and sell it today you would earn a total of  1,615  from holding LOreal SA or generate 4.94% return on investment over 90 days.

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

LOreal SA  vs.  Robertet SA

LOreal SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Robertet SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Robertet SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LOreal SA and Robertet

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

The idea behind LOreal SA and Robertet 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.