Correlation Between Essilor International and Becton Dickinson

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

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

Diversification Opportunities for Essilor International and Becton Dickinson

-0.5

Correlation Coefficient

Essilor International  Becton Dickinson

Very good diversification

The 3 months correlation between Essilor and Becton is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson and Essilor International 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 Essilor International SA are associated (or correlated) with Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of Essilor International i.e., Essilor International and Becton Dickinson go up and down completely randomly.

Pair Corralation between Essilor International and Becton Dickinson

Assuming the 90 days horizon Essilor International SA is expected to generate 0.97 times more return on investment than Becton Dickinson. However, Essilor International SA is 1.03 times less risky than Becton Dickinson. It trades about 0.04 of its potential returns per unit of risk. Becton Dickinson and is currently generating about -0.11 per unit of risk. If you would invest  11,832  in Essilor International SA on September 1, 2024 and sell it today you would earn a total of  302.00  from holding Essilor International SA or generate 2.55% return on investment over 90 days.

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

Essilor International SA  vs.  Becton Dickinson and

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.

Becton Dickinson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Becton Dickinson and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Essilor International and Becton Dickinson

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

The idea behind Essilor International SA and Becton Dickinson and 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.