Correlation Between LOréal SA and Estée Lauder
Can any of the company-specific risk be diversified away by investing in both LOréal SA and Estée Lauder 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 Estée Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOral SA and The Este Lauder, you can compare the effects of market volatilities on LOréal SA and Estée Lauder 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 Estée Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOréal SA and Estée Lauder.
Diversification Opportunities for LOréal SA and Estée Lauder
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LOréal and Estée is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estée Lauder 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 Estée Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estée Lauder has no effect on the direction of LOréal SA i.e., LOréal SA and Estée Lauder go up and down completely randomly.
Pair Corralation between LOréal SA and Estée Lauder
Assuming the 90 days horizon LOréal SA is expected to generate 3.53 times less return on investment than Estée Lauder. But when comparing it to its historical volatility, LOral SA is 1.87 times less risky than Estée Lauder. It trades about 0.12 of its potential returns per unit of risk. The Este Lauder is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 6,050 in The Este Lauder on October 19, 2024 and sell it today you would earn a total of 1,590 from holding The Este Lauder or generate 26.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOral SA vs. The Este Lauder
Performance |
| Timeline |
| LOréal SA |
| Estée Lauder |
LOréal SA and Estée Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOréal SA and Estée Lauder
The main advantage of trading using opposite LOréal SA and Estée Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOréal SA position performs unexpectedly, Estée Lauder 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 Estée Lauder will offset losses from the drop in Estée Lauder's long position.| LOréal SA vs. Strategic Education | LOréal SA vs. Advanced Medical Solutions | LOréal SA vs. Peijia Medical Limited | LOréal SA vs. Urban Outfitters |
| Estée Lauder vs. The Procter Gamble | Estée Lauder vs. LOREAL ADR 15EO | Estée Lauder vs. LOral SA | Estée Lauder vs. LOral SA |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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