Correlation Between Coupang LLC and LOreal SA

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

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

Diversification Opportunities for Coupang LLC and LOreal SA

-0.61

Correlation Coefficient

Coupang LLC  LOreal SA

Excellent diversification

The 3 months correlation between Coupang and LOreal is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Coupang LLC and LOreal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal SA and Coupang LLC 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 Coupang LLC are associated (or correlated) with LOreal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal SA has no effect on the direction of Coupang LLC i.e., Coupang LLC and LOreal SA go up and down completely randomly.

Pair Corralation between Coupang LLC and LOreal SA

Given the investment horizon of 90 days Coupang LLC is expected to generate 0.99 times more return on investment than LOreal SA. However, Coupang LLC is 1.01 times less risky than LOreal SA. It trades about 0.3 of its potential returns per unit of risk. LOreal SA is currently generating about 0.08 per unit of risk. If you would invest  2,191  in Coupang LLC on June 29, 2024 and sell it today you would earn a total of  323.50  from holding Coupang LLC or generate 14.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Coupang LLC  vs.  LOreal SA

Coupang LLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coupang LLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Coupang LLC reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Coupang LLC and LOreal SA

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

The idea behind Coupang LLC and LOreal 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.