Correlation Between LOreal SA and SEB SA
Can any of the company-specific risk be diversified away by investing in both LOreal SA and SEB SA 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 SEB SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOreal SA and SEB SA, you can compare the effects of market volatilities on LOreal SA and SEB SA 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 SEB SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOreal SA and SEB SA.
Diversification Opportunities for LOreal SA and SEB SA
Weak diversification
The 3 months correlation between LOreal and SEB is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA and SEB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEB 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 SEB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEB SA has no effect on the direction of LOreal SA i.e., LOreal SA and SEB SA go up and down completely randomly.
Pair Corralation between LOreal SA and SEB SA
Assuming the 90 days horizon LOreal SA is expected to generate 15.33 times less return on investment than SEB SA. But when comparing it to its historical volatility, LOreal SA is 1.28 times less risky than SEB SA. It trades about 0.0 of its potential returns per unit of risk. SEB SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 9,254 in SEB SA on November 2, 2024 and sell it today you would lose (29.00) from holding SEB SA or give up 0.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOreal SA vs. SEB SA
Performance |
| Timeline |
| LOreal SA |
| SEB SA |
LOreal SA and SEB SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LOreal SA and SEB SA
The main advantage of trading using opposite LOreal SA and SEB SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOreal SA position performs unexpectedly, SEB SA 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 SEB SA will offset losses from the drop in SEB SA'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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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