Correlation Between LOréal SA and Kimberly Clark
Can any of the company-specific risk be diversified away by investing in both LOréal SA and Kimberly Clark 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 Kimberly Clark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOral SA and Kimberly Clark de Mexico, you can compare the effects of market volatilities on LOréal SA and Kimberly Clark 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 Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOréal SA and Kimberly Clark.
Diversification Opportunities for LOréal SA and Kimberly Clark
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LOréal and Kimberly is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and Kimberly Clark de Mexico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark de 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark de has no effect on the direction of LOréal SA i.e., LOréal SA and Kimberly Clark go up and down completely randomly.
Pair Corralation between LOréal SA and Kimberly Clark
Assuming the 90 days horizon LOral SA is expected to under-perform the Kimberly Clark. In addition to that, LOréal SA is 1.64 times more volatile than Kimberly Clark de Mexico. It trades about -0.28 of its total potential returns per unit of risk. Kimberly Clark de Mexico is currently generating about -0.17 per unit of volatility. If you would invest 721.00 in Kimberly Clark de Mexico on August 28, 2024 and sell it today you would lose (35.00) from holding Kimberly Clark de Mexico or give up 4.85% 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. Kimberly Clark de Mexico
Performance |
| Timeline |
| LOréal SA |
| Kimberly Clark de |
LOréal SA and Kimberly Clark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOréal SA and Kimberly Clark
The main advantage of trading using opposite LOréal SA and Kimberly Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOréal SA position performs unexpectedly, Kimberly Clark 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 Kimberly Clark will offset losses from the drop in Kimberly Clark's long position.| LOréal SA vs. LOreal Co ADR | LOréal SA vs. Unilever PLC ADR | LOréal SA vs. Kimberly Clark | LOréal SA vs. The Clorox |
| Kimberly Clark vs. Reckitt Benckiser Group | Kimberly Clark vs. Church Dwight | Kimberly Clark vs. LOreal Co ADR | Kimberly Clark vs. Shiseido Company |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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