Correlation Between LOreal SA and AB Science
Can any of the company-specific risk be diversified away by investing in both LOreal SA and AB Science 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 SA and AB Science into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOreal SA and AB Science SA, you can compare the effects of market volatilities on LOreal SA and AB Science 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 SA with a short position of AB Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOreal SA and AB Science.
Diversification Opportunities for LOreal SA and AB Science
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LOreal and AB Science is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA and AB Science SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Science SA and LOreal SA 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 SA are associated (or correlated) with AB Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Science SA has no effect on the direction of LOreal SA i.e., LOreal SA and AB Science go up and down completely randomly.
Pair Corralation between LOreal SA and AB Science
Assuming the 90 days horizon LOreal SA is expected to generate 0.8 times more return on investment than AB Science. However, LOreal SA is 1.25 times less risky than AB Science. It trades about -0.15 of its potential returns per unit of risk. AB Science SA is currently generating about -0.18 per unit of risk. If you would invest 39,535 in LOreal SA on September 2, 2024 and sell it today you would lose (6,670) from holding LOreal SA or give up 16.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOreal SA vs. AB Science SA
Performance |
| Timeline |
| LOreal SA |
| AB Science SA |
LOreal SA and AB Science Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOreal SA and AB Science
The main advantage of trading using opposite LOreal SA and AB Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOreal SA position performs unexpectedly, AB Science 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 AB Science will offset losses from the drop in AB Science's long position.| LOreal SA vs. LVMH Mot Hennessy | LOreal SA vs. Danone SA | LOreal SA vs. Air Liquide SA | LOreal SA vs. Hermes International SCA |
| AB Science vs. Virbac SA | AB Science vs. Bonduelle SCA | AB Science vs. Biomerieux SA | AB Science vs. Guerbet S A |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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