Correlation Between LOral SA and LOREAL ADR
Can any of the company-specific risk be diversified away by investing in both LOral SA and LOREAL ADR 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 LOral SA and LOREAL ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOral SA and LOREAL ADR 15EO, you can compare the effects of market volatilities on LOral SA and LOREAL ADR 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 LOral SA with a short position of LOREAL ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOral SA and LOREAL ADR.
Diversification Opportunities for LOral SA and LOREAL ADR
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LOral and LOREAL is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and LOREAL ADR 15EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOREAL ADR 15EO and LOral 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 LOREAL ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOREAL ADR 15EO has no effect on the direction of LOral SA i.e., LOral SA and LOREAL ADR go up and down completely randomly.
Pair Corralation between LOral SA and LOREAL ADR
Assuming the 90 days horizon LOral SA is expected to under-perform the LOREAL ADR. But the stock apears to be less risky and, when comparing its historical volatility, LOral SA is 1.28 times less risky than LOREAL ADR. The stock trades about -0.17 of its potential returns per unit of risk. The LOREAL ADR 15EO is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 6,900 in LOREAL ADR 15EO on August 30, 2024 and sell it today you would lose (250.00) from holding LOREAL ADR 15EO or give up 3.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOral SA vs. LOREAL ADR 15EO
Performance |
| Timeline |
| LOral SA |
| LOREAL ADR 15EO |
LOral SA and LOREAL ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOral SA and LOREAL ADR
The main advantage of trading using opposite LOral SA and LOREAL ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOral SA position performs unexpectedly, LOREAL ADR 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 LOREAL ADR will offset losses from the drop in LOREAL ADR's long position.| LOral SA vs. ELECTRONIC ARTS | LOral SA vs. Japan Medical Dynamic | LOral SA vs. CompuGroup Medical SE | LOral SA vs. Avanos Medical |
| LOREAL ADR vs. RELIANCE STEEL AL | LOREAL ADR vs. United States Steel | LOREAL ADR vs. Western Copper and | LOREAL ADR vs. Khiron Life Sciences |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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