Correlation Between LOreal Co and Beiersdorf
Can any of the company-specific risk be diversified away by investing in both LOreal Co and Beiersdorf 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 Co and Beiersdorf 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 Beiersdorf AG ADR, you can compare the effects of market volatilities on LOreal Co and Beiersdorf 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 Co with a short position of Beiersdorf. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOreal Co and Beiersdorf.
Diversification Opportunities for LOreal Co and Beiersdorf
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LOreal and Beiersdorf is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding LOreal Co ADR and Beiersdorf AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beiersdorf AG ADR and LOreal 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 Beiersdorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beiersdorf AG ADR has no effect on the direction of LOreal Co i.e., LOreal Co and Beiersdorf go up and down completely randomly.
Pair Corralation between LOreal Co and Beiersdorf
Assuming the 90 days horizon LOreal Co ADR is expected to generate 0.84 times more return on investment than Beiersdorf. However, LOreal Co ADR is 1.2 times less risky than Beiersdorf. It trades about 0.28 of its potential returns per unit of risk. Beiersdorf AG ADR is currently generating about -0.01 per unit of risk. If you would invest 6,814 in LOreal Co ADR on September 20, 2024 and sell it today you would earn a total of 403.00 from holding LOreal Co ADR or generate 5.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
LOreal Co ADR vs. Beiersdorf AG ADR
Performance |
| Timeline |
| LOreal Co ADR |
| Beiersdorf AG ADR |
LOreal Co and Beiersdorf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOreal Co and Beiersdorf
The main advantage of trading using opposite LOreal Co and Beiersdorf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOreal Co position performs unexpectedly, Beiersdorf 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 Beiersdorf will offset losses from the drop in Beiersdorf's long position.| LOreal Co vs. V Group | LOreal Co vs. Fbec Worldwide | LOreal Co vs. Hiru Corporation | LOreal Co vs. Alkame Holdings |
| Beiersdorf vs. Church Dwight | Beiersdorf vs. LOreal Co ADR | Beiersdorf vs. Unilever PLC | Beiersdorf vs. Estee Lauder Companies |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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