Correlation Between REINET INVESTMENTS and ESSILORLUXOTTICA

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

By analyzing existing cross correlation between REINET INVESTMENTS SCA and ESSILORLUXOTTICA 12ON, you can compare the effects of market volatilities on REINET INVESTMENTS and ESSILORLUXOTTICA 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 REINET INVESTMENTS with a short position of ESSILORLUXOTTICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of REINET INVESTMENTS and ESSILORLUXOTTICA.

Diversification Opportunities for REINET INVESTMENTS and ESSILORLUXOTTICA

0.03

Correlation Coefficient

REINET INVESTMENTS  ESSILORLUXOTTICA

Significant diversification

The 3 months correlation between REINET and ESSILORLUXOTTICA is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding REINET INVESTMENTS SCA and ESSILORLUXOTTICA 12ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSILORLUXOTTICA 12ON and REINET INVESTMENTS 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 REINET INVESTMENTS SCA are associated (or correlated) with ESSILORLUXOTTICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSILORLUXOTTICA 12ON has no effect on the direction of REINET INVESTMENTS i.e., REINET INVESTMENTS and ESSILORLUXOTTICA go up and down completely randomly.

Pair Corralation between REINET INVESTMENTS and ESSILORLUXOTTICA

Assuming the 90 days horizon REINET INVESTMENTS SCA is expected to under-perform the ESSILORLUXOTTICA. In addition to that, REINET INVESTMENTS is 1.32 times more volatile than ESSILORLUXOTTICA 12ON. It trades about -0.04 of its total potential returns per unit of risk. ESSILORLUXOTTICA 12ON is currently generating about 0.12 per unit of volatility. If you would invest  11,500  in ESSILORLUXOTTICA 12ON on December 26, 2024 and sell it today you would earn a total of  1,800  from holding ESSILORLUXOTTICA 12ON or generate 15.65% return on investment over 90 days.

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

REINET INVESTMENTS SCA  vs.  ESSILORLUXOTTICA 12ON

REINET INVESTMENTS SCA

Risk-Adjusted Performance

Very Weak

Over the last 90 days REINET INVESTMENTS SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESSILORLUXOTTICA 12ON are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, ESSILORLUXOTTICA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REINET INVESTMENTS and ESSILORLUXOTTICA

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

The idea behind REINET INVESTMENTS SCA and ESSILORLUXOTTICA 12ON 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.