Correlation Between Unicharm and L’Oreal Co
Can any of the company-specific risk be diversified away by investing in both Unicharm and L’Oreal Co 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 Unicharm and L’Oreal Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unicharm and LOreal Co ADR, you can compare the effects of market volatilities on Unicharm and L’Oreal Co 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 Unicharm with a short position of L’Oreal Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unicharm and L’Oreal Co.
Diversification Opportunities for Unicharm and L’Oreal Co
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Unicharm and L’Oreal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Unicharm and LOreal Co ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal Co ADR and Unicharm 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 Unicharm are associated (or correlated) with L’Oreal Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal Co ADR has no effect on the direction of Unicharm i.e., Unicharm and L’Oreal Co go up and down completely randomly.
Pair Corralation between Unicharm and L’Oreal Co
Assuming the 90 days horizon Unicharm is expected to under-perform the L’Oreal Co. In addition to that, Unicharm is 2.45 times more volatile than LOreal Co ADR. It trades about -0.22 of its total potential returns per unit of risk. LOreal Co ADR is currently generating about -0.27 per unit of volatility. If you would invest 7,790 in LOreal Co ADR on August 29, 2024 and sell it today you would lose (770.00) from holding LOreal Co ADR or give up 9.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unicharm vs. LOreal Co ADR
Performance |
| Timeline |
| Unicharm |
| LOreal Co ADR |
Unicharm and L’Oreal Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unicharm and L’Oreal Co
The main advantage of trading using opposite Unicharm and L’Oreal Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unicharm position performs unexpectedly, L’Oreal Co 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 L’Oreal Co will offset losses from the drop in L’Oreal Co's long position.| Unicharm vs. Estee Lauder Companies | Unicharm vs. Honest Company | Unicharm vs. Hims Hers Health | Unicharm vs. Procter Gamble |
| L’Oreal Co vs. Unilever PLC | L’Oreal Co vs. Estee Lauder Companies | L’Oreal Co vs. Church Dwight | L’Oreal Co vs. Mannatech Incorporated |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |