Correlation Between Coloplast A/S and EssilorLuxottica

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

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

Diversification Opportunities for Coloplast A/S and EssilorLuxottica

-0.43

Correlation Coefficient

Coloplast A/S  EssilorLuxottica

Very good diversification

The 3 months correlation between Coloplast and EssilorLuxottica is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Coloplast AS and EssilorLuxottica Socit anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica Socit and Coloplast A/S 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 Coloplast AS 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 Socit has no effect on the direction of Coloplast A/S i.e., Coloplast A/S and EssilorLuxottica go up and down completely randomly.

Pair Corralation between Coloplast A/S and EssilorLuxottica

Assuming the 90 days horizon Coloplast A/S is expected to generate 4.87 times less return on investment than EssilorLuxottica. But when comparing it to its historical volatility, Coloplast AS is 1.1 times less risky than EssilorLuxottica. It trades about 0.01 of its potential returns per unit of risk. EssilorLuxottica Socit anonyme is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  23,448  in EssilorLuxottica Socit anonyme on September 3, 2024 and sell it today you would earn a total of  753.00  from holding EssilorLuxottica Socit anonyme or generate 3.21% return on investment over 90 days.

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

Coloplast AS  vs.  EssilorLuxottica Socit anonyme

Coloplast A/S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coloplast AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Coloplast A/S is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

EssilorLuxottica Socit

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica Socit anonyme are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EssilorLuxottica is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Coloplast A/S and EssilorLuxottica

The main advantage of trading using opposite Coloplast A/S and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coloplast A/S 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 Coloplast AS and EssilorLuxottica Socit anonyme 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.