Correlation Between LOreal SA and Malteries Franco

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

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

Diversification Opportunities for LOreal SA and Malteries Franco

-0.85

Correlation Coefficient

LOreal SA  Malteries Franco

Pay attention - limited upside

The 3 months correlation between LOreal and Malteries is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA and Malteries Franco Belges Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malteries Franco Belges and LOreal 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 LOreal SA are associated (or correlated) with Malteries Franco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malteries Franco Belges has no effect on the direction of LOreal SA i.e., LOreal SA and Malteries Franco go up and down completely randomly.

Pair Corralation between LOreal SA and Malteries Franco

Assuming the 90 days horizon LOreal SA is expected to under-perform the Malteries Franco. In addition to that, LOreal SA is 1.29 times more volatile than Malteries Franco Belges Socit. It trades about -0.05 of its total potential returns per unit of risk. Malteries Franco Belges Socit is currently generating about 0.17 per unit of volatility. If you would invest  65,000  in Malteries Franco Belges Socit on September 13, 2024 and sell it today you would earn a total of  10,000  from holding Malteries Franco Belges Socit or generate 15.38% return on investment over 90 days.

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

LOreal SA  vs.  Malteries Franco Belges Socit

LOreal SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOreal SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOreal SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Malteries Franco Belges

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Malteries Franco Belges Socit are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Malteries Franco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LOreal SA and Malteries Franco

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

The idea behind LOreal SA and Malteries Franco Belges Socit 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.