Correlation Between LOral SA and Shiseido

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

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

Diversification Opportunities for LOral SA and Shiseido

0.97

Correlation Coefficient

LOral SA  Shiseido

Almost no diversification

The 3 months correlation between LOral and Shiseido is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and Shiseido Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiseido and LOral SA 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 LOral SA are associated (or correlated) with Shiseido. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiseido has no effect on the direction of LOral SA i.e., LOral SA and Shiseido go up and down completely randomly.

Pair Corralation between LOral SA and Shiseido

Assuming the 90 days horizon LOral SA is expected to generate 1.14 times more return on investment than Shiseido. However, LOral SA is 1.14 times more volatile than Shiseido Company. It trades about -0.07 of its potential returns per unit of risk. Shiseido Company is currently generating about -0.17 per unit of risk. If you would invest  40,416  in LOral SA on September 14, 2024 and sell it today you would lose (4,657) from holding LOral SA or give up 11.52% of portfolio value over 90 days.

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

LOral SA  vs.  Shiseido Company

LOral SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shiseido

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shiseido Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LOral SA and Shiseido

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

The idea behind LOral SA and Shiseido Company 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.