Correlation Between SLR Investment and LOréal SA
Can any of the company-specific risk be diversified away by investing in both SLR Investment and LOréal 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 SLR Investment and LOréal SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SLR Investment Corp and LOral SA, you can compare the effects of market volatilities on SLR Investment and LOréal 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 SLR Investment with a short position of LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SLR Investment and LOréal SA.
Diversification Opportunities for SLR Investment and LOréal SA
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SLR and LOréal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding SLR Investment Corp and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal SA and SLR Investment 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 SLR Investment Corp are associated (or correlated) with LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of SLR Investment i.e., SLR Investment and LOréal SA go up and down completely randomly.
Pair Corralation between SLR Investment and LOréal SA
Assuming the 90 days horizon SLR Investment is expected to generate 11.86 times less return on investment than LOréal SA. But when comparing it to its historical volatility, SLR Investment Corp is 1.89 times less risky than LOréal SA. It trades about 0.04 of its potential returns per unit of risk. LOral SA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 33,180 in LOral SA on November 4, 2024 and sell it today you would earn a total of 2,500 from holding LOral SA or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SLR Investment Corp vs. LOral SA
Performance |
| Timeline |
| SLR Investment Corp |
| LOréal SA |
SLR Investment and LOréal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SLR Investment and LOréal SA
The main advantage of trading using opposite SLR Investment and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLR Investment position performs unexpectedly, LOréal 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 LOréal SA will offset losses from the drop in LOréal SA's long position.| SLR Investment vs. AUST AGRICULTURAL | SLR Investment vs. New Residential Investment | SLR Investment vs. Australian Agricultural | SLR Investment vs. TITAN MACHINERY |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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