Correlation Between EssilorLuxottica and Groupe JAJ

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

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

Diversification Opportunities for EssilorLuxottica and Groupe JAJ

-0.42

Correlation Coefficient

EssilorLuxottica  Groupe JAJ

Very good diversification

The 3 months correlation between EssilorLuxottica and Groupe is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding EssilorLuxottica S A and Groupe JAJ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupe JAJ and EssilorLuxottica 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 EssilorLuxottica S A are associated (or correlated) with Groupe JAJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupe JAJ has no effect on the direction of EssilorLuxottica i.e., EssilorLuxottica and Groupe JAJ go up and down completely randomly.

Pair Corralation between EssilorLuxottica and Groupe JAJ

Assuming the 90 days horizon EssilorLuxottica S A is expected to generate 0.25 times more return on investment than Groupe JAJ. However, EssilorLuxottica S A is 3.98 times less risky than Groupe JAJ. It trades about 0.06 of its potential returns per unit of risk. Groupe JAJ is currently generating about 0.0 per unit of risk. If you would invest  16,938  in EssilorLuxottica S A on September 29, 2024 and sell it today you would earn a total of  6,512  from holding EssilorLuxottica S A or generate 38.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.64%
Values	Daily Returns

EssilorLuxottica S A  vs.  Groupe JAJ

EssilorLuxottica S

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EssilorLuxottica S A are ranked lower than 12 (%) 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.

Groupe JAJ

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Groupe JAJ are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Groupe JAJ sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EssilorLuxottica and Groupe JAJ

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

The idea behind EssilorLuxottica S A and Groupe JAJ 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.