Correlation Between LOreal SA and Christian Dior
Can any of the company-specific risk be diversified away by investing in both LOreal SA and Christian Dior 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 Christian Dior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOreal SA and Christian Dior SE, you can compare the effects of market volatilities on LOreal SA and Christian Dior 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 Christian Dior. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOreal SA and Christian Dior.
Diversification Opportunities for LOreal SA and Christian Dior
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LOreal and Christian is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA and Christian Dior SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Christian Dior SE 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 Christian Dior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Christian Dior SE has no effect on the direction of LOreal SA i.e., LOreal SA and Christian Dior go up and down completely randomly.
Pair Corralation between LOreal SA and Christian Dior
Assuming the 90 days horizon LOreal SA is expected to under-perform the Christian Dior. But the stock apears to be less risky and, when comparing its historical volatility, LOreal SA is 1.21 times less risky than Christian Dior. The stock trades about -0.23 of its potential returns per unit of risk. The Christian Dior SE is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 59,050 in Christian Dior SE on August 28, 2024 and sell it today you would lose (3,600) from holding Christian Dior SE or give up 6.1% 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. Christian Dior SE
Performance |
| Timeline |
| LOreal SA |
| Christian Dior SE |
LOreal SA and Christian Dior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOreal SA and Christian Dior
The main advantage of trading using opposite LOreal SA and Christian Dior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOreal SA position performs unexpectedly, Christian Dior 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 Christian Dior will offset losses from the drop in Christian Dior'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 |
| Christian Dior vs. FIPP SA | Christian Dior vs. Adomos SA | Christian Dior vs. Acanthe Dveloppement | Christian Dior vs. Acheter Louer |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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