Correlation Between L’Oreal Co and Kimberly-Clark
Can any of the company-specific risk be diversified away by investing in both L’Oreal Co 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 L’Oreal Co and Kimberly-Clark 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 Kimberly Clark de Mexico, you can compare the effects of market volatilities on L’Oreal Co 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 L’Oreal Co with a short position of Kimberly-Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of L’Oreal Co and Kimberly-Clark.
Diversification Opportunities for L’Oreal Co and Kimberly-Clark
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between L’Oreal and Kimberly-Clark is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding LOreal Co ADR 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 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 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 L’Oreal Co i.e., L’Oreal Co and Kimberly-Clark go up and down completely randomly.
Pair Corralation between L’Oreal Co and Kimberly-Clark
Assuming the 90 days horizon LOreal Co ADR is expected to generate 0.74 times more return on investment than Kimberly-Clark. However, LOreal Co ADR is 1.35 times less risky than Kimberly-Clark. It trades about -0.01 of its potential returns per unit of risk. Kimberly Clark de Mexico is currently generating about -0.01 per unit of risk. If you would invest 9,350 in LOreal Co ADR on January 20, 2025 and sell it today you would lose (1,270) from holding LOreal Co ADR or give up 13.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOreal Co ADR vs. Kimberly Clark de Mexico
Performance |
| Timeline |
| LOreal Co ADR |
| Kimberly Clark de |
L’Oreal Co and Kimberly-Clark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L’Oreal Co and Kimberly-Clark
The main advantage of trading using opposite L’Oreal Co and Kimberly-Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L’Oreal Co 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.| 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 |
| 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 Stocks Directory module to find actively traded stocks across global markets.
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