Correlation Between Top Glove and EssilorLuxottica

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

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

Diversification Opportunities for Top Glove and EssilorLuxottica

0.53

Correlation Coefficient

Top Glove  EssilorLuxottica

Very weak diversification

The 3 months correlation between Top and EssilorLuxottica is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Top Glove and EssilorLuxottica Socit anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica Socit and Top Glove 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 Top Glove 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 Socit has no effect on the direction of Top Glove i.e., Top Glove and EssilorLuxottica go up and down completely randomly.

Pair Corralation between Top Glove and EssilorLuxottica

Assuming the 90 days horizon Top Glove is expected to generate 5.87 times more return on investment than EssilorLuxottica. However, Top Glove is 5.87 times more volatile than EssilorLuxottica Socit anonyme. It trades about 0.06 of its potential returns per unit of risk. EssilorLuxottica Socit anonyme is currently generating about 0.04 per unit of risk. If you would invest  18.00  in Top Glove on September 26, 2024 and sell it today you would earn a total of  13.00  from holding Top Glove or generate 72.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Top Glove  vs.  EssilorLuxottica Socit anonyme

Top Glove

Risk-Adjusted Performance

12 of 100

Good

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

EssilorLuxottica Socit

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica Socit anonyme are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EssilorLuxottica is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Top Glove and EssilorLuxottica

The main advantage of trading using opposite Top Glove and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Glove 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 Top Glove and EssilorLuxottica Socit anonyme 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.