Correlation Between EssilorLuxottica and Essilor International

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

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

Diversification Opportunities for EssilorLuxottica and Essilor International

0.79

Correlation Coefficient

EssilorLuxottica  Essilor International

Poor diversification

The 3 months correlation between EssilorLuxottica and Essilor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding EssilorLuxottica Socit anonyme and Essilor International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essilor International 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 Socit anonyme 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 EssilorLuxottica i.e., EssilorLuxottica and Essilor International go up and down completely randomly.

Pair Corralation between EssilorLuxottica and Essilor International

Assuming the 90 days horizon EssilorLuxottica Socit anonyme is expected to generate 1.63 times more return on investment than Essilor International. However, EssilorLuxottica is 1.63 times more volatile than Essilor International SA. It trades about 0.03 of its potential returns per unit of risk. Essilor International SA is currently generating about 0.04 per unit of risk. If you would invest  23,448  in EssilorLuxottica Socit anonyme on September 1, 2024 and sell it today you would earn a total of  696.00  from holding EssilorLuxottica Socit anonyme or generate 2.97% return on investment over 90 days.

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

EssilorLuxottica Socit anonyme  vs.  Essilor International SA

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 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 EssilorLuxottica and Essilor International

The main advantage of trading using opposite EssilorLuxottica and Essilor International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EssilorLuxottica 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 EssilorLuxottica Socit anonyme 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.