Correlation Between ESSILORLUXOTTICA and Demire Deutsche

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

By analyzing existing cross correlation between ESSILORLUXOTTICA 12ON and Demire Deutsche Mittelstand, you can compare the effects of market volatilities on ESSILORLUXOTTICA and Demire Deutsche 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 Demire Deutsche. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSILORLUXOTTICA and Demire Deutsche.

Diversification Opportunities for ESSILORLUXOTTICA and Demire Deutsche

0.11

Correlation Coefficient

ESSILORLUXOTTICA  Demire Deutsche

Average diversification

The 3 months correlation between ESSILORLUXOTTICA and Demire is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding ESSILORLUXOTTICA 12ON and Demire Deutsche Mittelstand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demire Deutsche Mitt 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 12ON are associated (or correlated) with Demire Deutsche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demire Deutsche Mitt has no effect on the direction of ESSILORLUXOTTICA i.e., ESSILORLUXOTTICA and Demire Deutsche go up and down completely randomly.

Pair Corralation between ESSILORLUXOTTICA and Demire Deutsche

Assuming the 90 days trading horizon ESSILORLUXOTTICA is expected to generate 4.02 times less return on investment than Demire Deutsche. But when comparing it to its historical volatility, ESSILORLUXOTTICA 12ON is 1.83 times less risky than Demire Deutsche. It trades about 0.16 of its potential returns per unit of risk. Demire Deutsche Mittelstand is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Demire Deutsche Mittelstand on February 15, 2024 and sell it today you would earn a total of  16.00  from holding Demire Deutsche Mittelstand or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

ESSILORLUXOTTICA 12ON  vs.  Demire Deutsche Mittelstand

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESSILORLUXOTTICA 12ON are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, ESSILORLUXOTTICA may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Demire Deutsche Mitt

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with ESSILORLUXOTTICA and Demire Deutsche

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

The idea behind ESSILORLUXOTTICA 12ON and Demire Deutsche Mittelstand 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 Anywhere module to track or share privately all of your investments from the convenience of any device.