Correlation Between L’Oreal Co and Embotelladora Andina
Can any of the company-specific risk be diversified away by investing in both L’Oreal Co and Embotelladora Andina 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 L’Oreal Co and Embotelladora Andina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOreal Co ADR and Embotelladora Andina SA, you can compare the effects of market volatilities on L’Oreal Co and Embotelladora Andina 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 L’Oreal Co with a short position of Embotelladora Andina. Check out your portfolio center. Please also check ongoing floating volatility patterns of L’Oreal Co and Embotelladora Andina.
Diversification Opportunities for L’Oreal Co and Embotelladora Andina
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between L’Oreal and Embotelladora is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding LOreal Co ADR and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina and L’Oreal Co 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 Co ADR are associated (or correlated) with Embotelladora Andina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embotelladora Andina has no effect on the direction of L’Oreal Co i.e., L’Oreal Co and Embotelladora Andina go up and down completely randomly.
Pair Corralation between L’Oreal Co and Embotelladora Andina
Assuming the 90 days horizon LOreal Co ADR is expected to under-perform the Embotelladora Andina. But the pink sheet apears to be less risky and, when comparing its historical volatility, LOreal Co ADR is 1.02 times less risky than Embotelladora Andina. The pink sheet trades about -0.38 of its potential returns per unit of risk. The Embotelladora Andina SA is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 1,388 in Embotelladora Andina SA on August 28, 2024 and sell it today you would lose (77.00) from holding Embotelladora Andina SA or give up 5.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOreal Co ADR vs. Embotelladora Andina SA
Performance |
| Timeline |
| LOreal Co ADR |
| Embotelladora Andina |
L’Oreal Co and Embotelladora Andina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L’Oreal Co and Embotelladora Andina
The main advantage of trading using opposite L’Oreal Co and Embotelladora Andina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L’Oreal Co position performs unexpectedly, Embotelladora Andina 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 Embotelladora Andina will offset losses from the drop in Embotelladora Andina's long position.| L’Oreal Co vs. Embotelladora Andina SA | L’Oreal Co vs. Signet International Holdings | L’Oreal Co vs. National Beverage Corp | L’Oreal Co vs. PT Astra International |
| Embotelladora Andina vs. Signet International Holdings | Embotelladora Andina vs. National Beverage Corp | Embotelladora Andina vs. PT Astra International | Embotelladora Andina vs. Embotelladora Andina 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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