Correlation Between LOreal SA and Savencia
Can any of the company-specific risk be diversified away by investing in both LOreal SA and Savencia 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 Savencia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOreal SA and Savencia SA, you can compare the effects of market volatilities on LOreal SA and Savencia 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 Savencia. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOreal SA and Savencia.
Diversification Opportunities for LOreal SA and Savencia
Weak diversification
The 3 months correlation between LOreal and Savencia is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA and Savencia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Savencia 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 Savencia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Savencia SA has no effect on the direction of LOreal SA i.e., LOreal SA and Savencia go up and down completely randomly.
Pair Corralation between LOreal SA and Savencia
Assuming the 90 days horizon LOreal SA is expected to under-perform the Savencia. In addition to that, LOreal SA is 1.01 times more volatile than Savencia SA. It trades about -0.23 of its total potential returns per unit of risk. Savencia SA is currently generating about 0.02 per unit of volatility. If you would invest 5,180 in Savencia SA on August 29, 2024 and sell it today you would earn a total of 20.00 from holding Savencia SA or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOreal SA vs. Savencia SA
Performance |
| Timeline |
| LOreal SA |
| Savencia SA |
LOreal SA and Savencia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOreal SA and Savencia
The main advantage of trading using opposite LOreal SA and Savencia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOreal SA position performs unexpectedly, Savencia 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 Savencia will offset losses from the drop in Savencia'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 |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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