Correlation Between L’Oreal Co and LOral SA
Can any of the company-specific risk be diversified away by investing in both L’Oreal Co and LOral SA 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 LOral SA 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 LOral SA, you can compare the effects of market volatilities on L’Oreal Co and LOral SA 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 LOral SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of L’Oreal Co and LOral SA.
Diversification Opportunities for L’Oreal Co and LOral SA
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between L’Oreal and LOral is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding LOreal Co ADR and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOral SA 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 LOral SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOral SA has no effect on the direction of L’Oreal Co i.e., L’Oreal Co and LOral SA go up and down completely randomly.
Pair Corralation between L’Oreal Co and LOral SA
Assuming the 90 days horizon L’Oreal Co is expected to generate 2.24 times less return on investment than LOral SA. But when comparing it to its historical volatility, LOreal Co ADR is 1.24 times less risky than LOral SA. It trades about 0.0 of its potential returns per unit of risk. LOral SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 36,228 in LOral SA on September 4, 2024 and sell it today you would lose (2,104) from holding LOral SA or give up 5.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
LOreal Co ADR vs. LOral SA
Performance |
| Timeline |
| LOreal Co ADR |
| LOral SA |
L’Oreal Co and LOral SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L’Oreal Co and LOral SA
The main advantage of trading using opposite L’Oreal Co and LOral SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L’Oreal Co position performs unexpectedly, LOral SA 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 LOral SA will offset losses from the drop in LOral SA'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 |
| LOral SA vs. LOreal Co ADR | LOral SA vs. Unilever PLC ADR | LOral SA vs. Kimberly Clark | LOral SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |