Correlation Between Shiseido and LOral SA
Can any of the company-specific risk be diversified away by investing in both Shiseido and LOral 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 Shiseido and LOral SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shiseido Company and LOral SA, you can compare the effects of market volatilities on Shiseido and LOral 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 Shiseido with a short position of LOral SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shiseido and LOral SA.
Diversification Opportunities for Shiseido and LOral SA
Almost no diversification
The 3 months correlation between Shiseido and LOral is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Shiseido Company and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOral SA and Shiseido 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 Shiseido Company are associated (or correlated) with LOral SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOral SA has no effect on the direction of Shiseido i.e., Shiseido and LOral SA go up and down completely randomly.
Pair Corralation between Shiseido and LOral SA
Assuming the 90 days horizon Shiseido is expected to generate 7.96 times less return on investment than LOral SA. But when comparing it to its historical volatility, Shiseido Company is 1.47 times less risky than LOral SA. It trades about 0.02 of its potential returns per unit of risk. LOral SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 35,800 in LOral SA on September 12, 2024 and sell it today you would earn a total of 1,200 from holding LOral SA or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shiseido Company vs. LOral SA
Performance |
| Timeline |
| Shiseido |
| LOral SA |
Shiseido and LOral SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shiseido and LOral SA
The main advantage of trading using opposite Shiseido and LOral SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shiseido position performs unexpectedly, LOral 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 LOral SA will offset losses from the drop in LOral SA's long position.| Shiseido vs. Church Dwight | Shiseido vs. Kimberly Clark de Mexico | Shiseido vs. LOreal Co ADR | Shiseido vs. Unilever PLC |
| LOral SA vs. Inter Parfums | LOral SA vs. European Wax Center | LOral SA vs. Estee Lauder Companies | LOral SA vs. Reckitt Benckiser Group |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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