Correlation Between Beiersdorf Aktiengesellscha and L’Oreal Co
Can any of the company-specific risk be diversified away by investing in both Beiersdorf Aktiengesellscha and L’Oreal Co 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 Beiersdorf Aktiengesellscha and L’Oreal Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beiersdorf Aktiengesellschaft and LOreal Co ADR, you can compare the effects of market volatilities on Beiersdorf Aktiengesellscha and L’Oreal Co 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 Beiersdorf Aktiengesellscha with a short position of L’Oreal Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beiersdorf Aktiengesellscha and L’Oreal Co.
Diversification Opportunities for Beiersdorf Aktiengesellscha and L’Oreal Co
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Beiersdorf and L’Oreal is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Beiersdorf Aktiengesellschaft and LOreal Co ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal Co ADR and Beiersdorf Aktiengesellscha 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 Beiersdorf Aktiengesellschaft are associated (or correlated) with L’Oreal Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal Co ADR has no effect on the direction of Beiersdorf Aktiengesellscha i.e., Beiersdorf Aktiengesellscha and L’Oreal Co go up and down completely randomly.
Pair Corralation between Beiersdorf Aktiengesellscha and L’Oreal Co
Assuming the 90 days horizon Beiersdorf Aktiengesellschaft is expected to generate 0.92 times more return on investment than L’Oreal Co. However, Beiersdorf Aktiengesellschaft is 1.08 times less risky than L’Oreal Co. It trades about 0.01 of its potential returns per unit of risk. LOreal Co ADR is currently generating about -0.03 per unit of risk. If you would invest 12,480 in Beiersdorf Aktiengesellschaft on September 4, 2024 and sell it today you would lose (20.00) from holding Beiersdorf Aktiengesellschaft or give up 0.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 60.59% |
| Values | Daily Returns |
Beiersdorf Aktiengesellschaft vs. LOreal Co ADR
Performance |
| Timeline |
| Beiersdorf Aktiengesellscha |
| LOreal Co ADR |
Beiersdorf Aktiengesellscha and L’Oreal Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beiersdorf Aktiengesellscha and L’Oreal Co
The main advantage of trading using opposite Beiersdorf Aktiengesellscha and L’Oreal Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beiersdorf Aktiengesellscha position performs unexpectedly, L’Oreal Co 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 L’Oreal Co will offset losses from the drop in L’Oreal Co's long position.| Beiersdorf Aktiengesellscha vs. Henkel Ag A | Beiersdorf Aktiengesellscha vs. Essity AB | Beiersdorf Aktiengesellscha vs. Hengan International Group |
| L’Oreal Co vs. Unilever PLC | L’Oreal Co vs. Estee Lauder Companies | L’Oreal Co vs. Church Dwight | L’Oreal Co vs. Mannatech Incorporated |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |