Correlation Between LOreal SA and Aramis SAS
Can any of the company-specific risk be diversified away by investing in both LOreal SA and Aramis SAS 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 Aramis SAS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOreal SA and Aramis SAS, you can compare the effects of market volatilities on LOreal SA and Aramis SAS 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 Aramis SAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOreal SA and Aramis SAS.
Diversification Opportunities for LOreal SA and Aramis SAS
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LOreal and Aramis is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA and Aramis SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aramis SAS 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 Aramis SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aramis SAS has no effect on the direction of LOreal SA i.e., LOreal SA and Aramis SAS go up and down completely randomly.
Pair Corralation between LOreal SA and Aramis SAS
Assuming the 90 days horizon LOreal SA is expected to under-perform the Aramis SAS. But the stock apears to be less risky and, when comparing its historical volatility, LOreal SA is 1.13 times less risky than Aramis SAS. The stock trades about -0.13 of its potential returns per unit of risk. The Aramis SAS is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 540.00 in Aramis SAS on August 28, 2024 and sell it today you would earn a total of 135.00 from holding Aramis SAS or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOreal SA vs. Aramis SAS
Performance |
| Timeline |
| LOreal SA |
| Aramis SAS |
LOreal SA and Aramis SAS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOreal SA and Aramis SAS
The main advantage of trading using opposite LOreal SA and Aramis SAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOreal SA position performs unexpectedly, Aramis SAS 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 Aramis SAS will offset losses from the drop in Aramis SAS'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 |
| Aramis SAS vs. Believe SAS | Aramis SAS vs. OVH Groupe SAS | Aramis SAS vs. Derichebourg | Aramis SAS vs. Solutions 30 SE |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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