Correlation Between EssilorLuxottica and Straumann Holding

Can any of the company-specific risk be diversified away by investing in both EssilorLuxottica and Straumann Holding 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 Straumann Holding 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 Straumann Holding AG, you can compare the effects of market volatilities on EssilorLuxottica and Straumann Holding 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 Straumann Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of EssilorLuxottica and Straumann Holding.

Diversification Opportunities for EssilorLuxottica and Straumann Holding

-0.42

Correlation Coefficient

EssilorLuxottica  Straumann Holding

Very good diversification

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

Pair Corralation between EssilorLuxottica and Straumann Holding

Assuming the 90 days horizon EssilorLuxottica Socit anonyme is expected to generate 0.43 times more return on investment than Straumann Holding. However, EssilorLuxottica Socit anonyme is 2.35 times less risky than Straumann Holding. It trades about 0.04 of its potential returns per unit of risk. Straumann Holding AG is currently generating about -0.04 per unit of risk. 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

EssilorLuxottica Socit anonyme  vs.  Straumann Holding AG

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.

Straumann Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Straumann Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with EssilorLuxottica and Straumann Holding

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

The idea behind EssilorLuxottica Socit anonyme and Straumann Holding AG 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.