Correlation Between Carmat and EssilorLuxottica

Can any of the company-specific risk be diversified away by investing in both Carmat and EssilorLuxottica 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 Carmat and EssilorLuxottica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carmat and EssilorLuxottica S A, you can compare the effects of market volatilities on Carmat and EssilorLuxottica 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 Carmat with a short position of EssilorLuxottica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carmat and EssilorLuxottica.

Diversification Opportunities for Carmat and EssilorLuxottica

-0.8

Correlation Coefficient

Carmat  EssilorLuxottica

Pay attention - limited upside

The 3 months correlation between Carmat and EssilorLuxottica is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Carmat and EssilorLuxottica S A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica S and Carmat 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 Carmat are associated (or correlated) with EssilorLuxottica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EssilorLuxottica S has no effect on the direction of Carmat i.e., Carmat and EssilorLuxottica go up and down completely randomly.

Pair Corralation between Carmat and EssilorLuxottica

Assuming the 90 days trading horizon Carmat is expected to under-perform the EssilorLuxottica. In addition to that, Carmat is 5.15 times more volatile than EssilorLuxottica S A. It trades about -0.13 of its total potential returns per unit of risk. EssilorLuxottica S A is currently generating about 0.18 per unit of volatility. If you would invest  20,590  in EssilorLuxottica S A on September 24, 2024 and sell it today you would earn a total of  2,530  from holding EssilorLuxottica S A or generate 12.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Carmat  vs.  EssilorLuxottica S A

Carmat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

EssilorLuxottica S

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica S A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EssilorLuxottica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carmat and EssilorLuxottica

The main advantage of trading using opposite Carmat and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carmat position performs unexpectedly, EssilorLuxottica 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 EssilorLuxottica will offset losses from the drop in EssilorLuxottica's long position.

The idea behind Carmat and EssilorLuxottica S A pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.