Correlation Between Inter Parfums and LOréal SA
Can any of the company-specific risk be diversified away by investing in both Inter Parfums and LOréal SA 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 Inter Parfums and LOréal SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inter Parfums and LOral SA, you can compare the effects of market volatilities on Inter Parfums and LOréal SA 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 Inter Parfums with a short position of LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inter Parfums and LOréal SA.
Diversification Opportunities for Inter Parfums and LOréal SA
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Inter and LOréal is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Inter Parfums and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal SA and Inter Parfums 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 Inter Parfums are associated (or correlated) with LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of Inter Parfums i.e., Inter Parfums and LOréal SA go up and down completely randomly.
Pair Corralation between Inter Parfums and LOréal SA
Given the investment horizon of 90 days Inter Parfums is expected to generate 0.9 times more return on investment than LOréal SA. However, Inter Parfums is 1.11 times less risky than LOréal SA. It trades about 0.27 of its potential returns per unit of risk. LOral SA is currently generating about -0.28 per unit of risk. If you would invest 12,441 in Inter Parfums on August 28, 2024 and sell it today you would earn a total of 1,398 from holding Inter Parfums or generate 11.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inter Parfums vs. LOral SA
Performance |
| Timeline |
| Inter Parfums |
| LOréal SA |
Inter Parfums and LOréal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inter Parfums and LOréal SA
The main advantage of trading using opposite Inter Parfums and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inter Parfums position performs unexpectedly, LOréal SA 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 LOréal SA will offset losses from the drop in LOréal SA's long position.| Inter Parfums vs. J J Snack | Inter Parfums vs. John B Sanfilippo | Inter Parfums vs. Innospec | Inter Parfums vs. Independent Bank |
| LOréal SA vs. LOreal Co ADR | LOréal SA vs. Unilever PLC ADR | LOréal SA vs. Kimberly Clark | LOréal SA vs. The Clorox |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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