Correlation Between L’Oreal Co and Henkel AG
Can any of the company-specific risk be diversified away by investing in both L’Oreal Co and Henkel AG 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 Henkel AG 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 Henkel AG Co, you can compare the effects of market volatilities on L’Oreal Co and Henkel AG 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 Henkel AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of L’Oreal Co and Henkel AG.
Diversification Opportunities for L’Oreal Co and Henkel AG
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between L’Oreal and Henkel is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding LOreal Co ADR and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG 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 Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of L’Oreal Co i.e., L’Oreal Co and Henkel AG go up and down completely randomly.
Pair Corralation between L’Oreal Co and Henkel AG
Assuming the 90 days horizon LOreal Co ADR is expected to under-perform the Henkel AG. In addition to that, L’Oreal Co is 1.41 times more volatile than Henkel AG Co. It trades about -0.03 of its total potential returns per unit of risk. Henkel AG Co is currently generating about 0.03 per unit of volatility. If you would invest 1,748 in Henkel AG Co on September 4, 2024 and sell it today you would earn a total of 149.00 from holding Henkel AG Co or generate 8.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
LOreal Co ADR vs. Henkel AG Co
Performance |
| Timeline |
| LOreal Co ADR |
| Henkel AG |
L’Oreal Co and Henkel AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L’Oreal Co and Henkel AG
The main advantage of trading using opposite L’Oreal Co and Henkel AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L’Oreal Co position performs unexpectedly, Henkel AG 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 Henkel AG will offset losses from the drop in Henkel AG's long position.| L’Oreal Co vs. Unilever PLC | L’Oreal Co vs. Estee Lauder Companies | L’Oreal Co vs. Church Dwight | L’Oreal Co vs. Mannatech Incorporated |
| Henkel AG vs. LOreal Co ADR | Henkel AG vs. Unilever PLC ADR | Henkel AG vs. Kimberly Clark | Henkel AG vs. The Clorox |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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