Correlation Between LOREAL ADR and GLOBAL COSMED
Can any of the company-specific risk be diversified away by investing in both LOREAL ADR and GLOBAL COSMED 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 LOREAL ADR and GLOBAL COSMED into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOREAL ADR 15EO and GLOBAL MED SA, you can compare the effects of market volatilities on LOREAL ADR and GLOBAL COSMED 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 LOREAL ADR with a short position of GLOBAL COSMED. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOREAL ADR and GLOBAL COSMED.
Diversification Opportunities for LOREAL ADR and GLOBAL COSMED
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LOREAL and GLOBAL is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding LOREAL ADR 15EO and GLOBAL MED SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBAL MED SA and LOREAL ADR 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 LOREAL ADR 15EO are associated (or correlated) with GLOBAL COSMED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLOBAL MED SA has no effect on the direction of LOREAL ADR i.e., LOREAL ADR and GLOBAL COSMED go up and down completely randomly.
Pair Corralation between LOREAL ADR and GLOBAL COSMED
Assuming the 90 days trading horizon LOREAL ADR 15EO is expected to under-perform the GLOBAL COSMED. But the stock apears to be less risky and, when comparing its historical volatility, LOREAL ADR 15EO is 1.48 times less risky than GLOBAL COSMED. The stock trades about -0.03 of its potential returns per unit of risk. The GLOBAL MED SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 59.00 in GLOBAL MED SA on November 3, 2024 and sell it today you would earn a total of 65.00 from holding GLOBAL MED SA or generate 110.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
LOREAL ADR 15EO vs. GLOBAL MED SA
Performance |
| Timeline |
| LOREAL ADR 15EO |
| GLOBAL MED SA |
LOREAL ADR and GLOBAL COSMED Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOREAL ADR and GLOBAL COSMED
The main advantage of trading using opposite LOREAL ADR and GLOBAL COSMED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOREAL ADR position performs unexpectedly, GLOBAL COSMED 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 GLOBAL COSMED will offset losses from the drop in GLOBAL COSMED's long position.| LOREAL ADR vs. Universal Health Realty | LOREAL ADR vs. Aegean Airlines SA | LOREAL ADR vs. SINGAPORE AIRLINES | LOREAL ADR vs. US Physical Therapy |
| GLOBAL COSMED vs. Yanzhou Coal Mining | GLOBAL COSMED vs. GALENA MINING LTD | GLOBAL COSMED vs. MCEWEN MINING INC | GLOBAL COSMED vs. Singapore Airlines Limited |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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