Correlation Between Smurfit Kappa and LOREAL ADR
Can any of the company-specific risk be diversified away by investing in both Smurfit Kappa and LOREAL ADR 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 Smurfit Kappa and LOREAL ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smurfit Kappa Group and LOREAL ADR 15EO, you can compare the effects of market volatilities on Smurfit Kappa and LOREAL ADR 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 Smurfit Kappa with a short position of LOREAL ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit Kappa and LOREAL ADR.
Diversification Opportunities for Smurfit Kappa and LOREAL ADR
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Smurfit and LOREAL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and LOREAL ADR 15EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOREAL ADR 15EO and Smurfit Kappa 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 Smurfit Kappa Group are associated (or correlated) with LOREAL ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOREAL ADR 15EO has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and LOREAL ADR go up and down completely randomly.
Pair Corralation between Smurfit Kappa and LOREAL ADR
Assuming the 90 days horizon Smurfit Kappa Group is expected to generate 2.08 times more return on investment than LOREAL ADR. However, Smurfit Kappa is 2.08 times more volatile than LOREAL ADR 15EO. It trades about 0.3 of its potential returns per unit of risk. LOREAL ADR 15EO is currently generating about -0.07 per unit of risk. If you would invest 4,104 in Smurfit Kappa Group on August 30, 2024 and sell it today you would earn a total of 1,196 from holding Smurfit Kappa Group or generate 29.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Smurfit Kappa Group vs. LOREAL ADR 15EO
Performance |
| Timeline |
| Smurfit Kappa Group |
| LOREAL ADR 15EO |
Smurfit Kappa and LOREAL ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smurfit Kappa and LOREAL ADR
The main advantage of trading using opposite Smurfit Kappa and LOREAL ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smurfit Kappa position performs unexpectedly, LOREAL ADR 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 LOREAL ADR will offset losses from the drop in LOREAL ADR's long position.| Smurfit Kappa vs. Amcor plc | Smurfit Kappa vs. Packaging of | Smurfit Kappa vs. CCL Industries | Smurfit Kappa vs. AptarGroup |
| LOREAL ADR vs. RELIANCE STEEL AL | LOREAL ADR vs. United States Steel | LOREAL ADR vs. Western Copper and | LOREAL ADR vs. Khiron Life Sciences |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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