Correlation Between Clorox and L’Oreal Co
Can any of the company-specific risk be diversified away by investing in both Clorox 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 Clorox 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 The Clorox and LOreal Co ADR, you can compare the effects of market volatilities on Clorox 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 Clorox with a short position of L’Oreal Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clorox and L’Oreal Co.
Diversification Opportunities for Clorox and L’Oreal Co
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Clorox and L’Oreal is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Clorox 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 Clorox 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 The Clorox 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 Clorox i.e., Clorox and L’Oreal Co go up and down completely randomly.
Pair Corralation between Clorox and L’Oreal Co
Considering the 90-day investment horizon The Clorox is expected to generate 0.51 times more return on investment than L’Oreal Co. However, The Clorox is 1.95 times less risky than L’Oreal Co. It trades about 0.42 of its potential returns per unit of risk. LOreal Co ADR is currently generating about -0.38 per unit of risk. If you would invest 15,772 in The Clorox on August 27, 2024 and sell it today you would earn a total of 1,158 from holding The Clorox or generate 7.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Clorox vs. LOreal Co ADR
Performance |
| Timeline |
| Clorox |
| LOreal Co ADR |
Clorox and L’Oreal Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clorox and L’Oreal Co
The main advantage of trading using opposite Clorox and L’Oreal Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clorox 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.| Clorox vs. Colgate Palmolive | Clorox vs. Procter Gamble | Clorox vs. Unilever PLC ADR | Clorox vs. Church Dwight |
| L’Oreal Co vs. Embotelladora Andina SA | L’Oreal Co vs. Signet International Holdings | L’Oreal Co vs. National Beverage Corp | L’Oreal Co vs. PT Astra International |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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