Correlation Between LOreal SA and Reworld Media
Can any of the company-specific risk be diversified away by investing in both LOreal SA and Reworld Media 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 Reworld Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOreal SA and Reworld Media, you can compare the effects of market volatilities on LOreal SA and Reworld Media 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 Reworld Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOreal SA and Reworld Media.
Diversification Opportunities for LOreal SA and Reworld Media
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LOreal and Reworld is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA and Reworld Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reworld Media 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 Reworld Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reworld Media has no effect on the direction of LOreal SA i.e., LOreal SA and Reworld Media go up and down completely randomly.
Pair Corralation between LOreal SA and Reworld Media
Assuming the 90 days horizon LOreal SA is expected to generate 0.45 times more return on investment than Reworld Media. However, LOreal SA is 2.22 times less risky than Reworld Media. It trades about -0.04 of its potential returns per unit of risk. Reworld Media is currently generating about -0.07 per unit of risk. If you would invest 41,541 in LOreal SA on August 28, 2024 and sell it today you would lose (8,171) from holding LOreal SA or give up 19.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOreal SA vs. Reworld Media
Performance |
| Timeline |
| LOreal SA |
| Reworld Media |
LOreal SA and Reworld Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOreal SA and Reworld Media
The main advantage of trading using opposite LOreal SA and Reworld Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOreal SA position performs unexpectedly, Reworld Media 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 Reworld Media will offset losses from the drop in Reworld Media'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 |
| Reworld Media vs. Vallourec | Reworld Media vs. Genfit | Reworld Media vs. Innate Pharma | Reworld Media vs. Etablissements Maurel et |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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