Correlation Between Coloplast and Essilor International

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

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

Diversification Opportunities for Coloplast and Essilor International

-0.43

Correlation Coefficient

Coloplast  Essilor International

Very good diversification

The 3 months correlation between Coloplast and Essilor is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Coloplast AS and Essilor International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essilor International and Coloplast 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 Essilor International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essilor International has no effect on the direction of Coloplast i.e., Coloplast and Essilor International go up and down completely randomly.

Pair Corralation between Coloplast and Essilor International

Assuming the 90 days horizon Coloplast is expected to generate 1.82 times less return on investment than Essilor International. In addition to that, Coloplast is 1.9 times more volatile than Essilor International SA. It trades about 0.05 of its total potential returns per unit of risk. Essilor International SA is currently generating about 0.17 per unit of volatility. If you would invest  11,612  in Essilor International SA on August 31, 2024 and sell it today you would earn a total of  522.00  from holding Essilor International SA or generate 4.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Coloplast AS  vs.  Essilor International SA

Coloplast AS

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 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Essilor International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Essilor International SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Essilor International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coloplast and Essilor International

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

The idea behind Coloplast AS and Essilor International SA 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.