Correlation Between LOréal SA and 2G ENERGY
Can any of the company-specific risk be diversified away by investing in both LOréal SA and 2G ENERGY 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 LOréal SA and 2G ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOral SA and 2G ENERGY , you can compare the effects of market volatilities on LOréal SA and 2G ENERGY 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 LOréal SA with a short position of 2G ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOréal SA and 2G ENERGY.
Diversification Opportunities for LOréal SA and 2G ENERGY
Very weak diversification
The 3 months correlation between LOréal and 2GB is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and 2G ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2G ENERGY and LOréal SA 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 LOral SA are associated (or correlated) with 2G ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2G ENERGY has no effect on the direction of LOréal SA i.e., LOréal SA and 2G ENERGY go up and down completely randomly.
Pair Corralation between LOréal SA and 2G ENERGY
Assuming the 90 days horizon LOral SA is expected to under-perform the 2G ENERGY. But the stock apears to be less risky and, when comparing its historical volatility, LOral SA is 1.18 times less risky than 2G ENERGY. The stock trades about -0.1 of its potential returns per unit of risk. The 2G ENERGY is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 2,465 in 2G ENERGY on November 28, 2024 and sell it today you would lose (90.00) from holding 2G ENERGY or give up 3.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
LOral SA vs. 2G ENERGY
Performance |
| Timeline |
| LOréal SA |
| 2G ENERGY |
LOréal SA and 2G ENERGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOréal SA and 2G ENERGY
The main advantage of trading using opposite LOréal SA and 2G ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOréal SA position performs unexpectedly, 2G ENERGY 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 2G ENERGY will offset losses from the drop in 2G ENERGY's long position.| LOréal SA vs. China Resources Beer | LOréal SA vs. RETAIL FOOD GROUP | LOréal SA vs. MARKET VECTR RETAIL | LOréal SA vs. Retail Estates NV |
| 2G ENERGY vs. COFCO Joycome Foods | 2G ENERGY vs. Axfood AB | 2G ENERGY vs. SLR Investment Corp | 2G ENERGY vs. CONAGRA FOODS |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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