Correlation Between Inter Parfums and L’Oreal Co
Can any of the company-specific risk be diversified away by investing in both Inter Parfums 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 Inter Parfums 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 Inter Parfums and LOreal Co ADR, you can compare the effects of market volatilities on Inter Parfums 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 Inter Parfums with a short position of L’Oreal Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inter Parfums and L’Oreal Co.
Diversification Opportunities for Inter Parfums and L’Oreal Co
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inter and L’Oreal is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Inter Parfums 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 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 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 Inter Parfums i.e., Inter Parfums and L’Oreal Co go up and down completely randomly.
Pair Corralation between Inter Parfums and L’Oreal Co
Given the investment horizon of 90 days Inter Parfums is expected to under-perform the L’Oreal Co. In addition to that, Inter Parfums is 1.25 times more volatile than LOreal Co ADR. It trades about -0.09 of its total potential returns per unit of risk. LOreal Co ADR is currently generating about 0.06 per unit of volatility. If you would invest 7,061 in LOreal Co ADR on November 18, 2024 and sell it today you would earn a total of 134.00 from holding LOreal Co ADR or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inter Parfums vs. LOreal Co ADR
Performance |
| Timeline |
| Inter Parfums |
| LOreal Co ADR |
Inter Parfums and L’Oreal Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inter Parfums and L’Oreal Co
The main advantage of trading using opposite Inter Parfums and L’Oreal Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inter Parfums 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.| Inter Parfums vs. J J Snack | Inter Parfums vs. John B Sanfilippo | Inter Parfums vs. Innospec | Inter Parfums vs. Independent Bank |
| 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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