Correlation Between L’Oreal Co and Kimberly Clark

Can any of the company-specific risk be diversified away by investing in both L’Oreal Co and Kimberly Clark 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 L’Oreal Co and Kimberly Clark into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LOreal Co ADR and Kimberly Clark, you can compare the effects of market volatilities on L’Oreal Co and Kimberly Clark 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 L’Oreal Co with a short position of Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of L’Oreal Co and Kimberly Clark.

Diversification Opportunities for L’Oreal Co and Kimberly Clark

-0.22

Correlation Coefficient

L’Oreal Co  Kimberly Clark

Very good diversification

The 3 months correlation between L’Oreal and Kimberly is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding LOreal Co ADR and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark and L’Oreal Co 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 Co ADR are associated (or correlated) with Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of L’Oreal Co i.e., L’Oreal Co and Kimberly Clark go up and down completely randomly.

Pair Corralation between L’Oreal Co and Kimberly Clark

Assuming the 90 days horizon LOreal Co ADR is expected to generate 1.22 times more return on investment than Kimberly Clark. However, L’Oreal Co is 1.22 times more volatile than Kimberly Clark. It trades about 0.02 of its potential returns per unit of risk. Kimberly Clark is currently generating about 0.0 per unit of risk. If you would invest  8,616  in LOreal Co ADR on May 6, 2025 and sell it today you would earn a total of  77.00  from holding LOreal Co ADR or generate 0.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

LOreal Co ADR  vs.  Kimberly Clark

LOreal Co ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LOreal Co ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, L’Oreal Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kimberly Clark

Risk-Adjusted Performance

Very Weak

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

Pair Trading with L’Oreal Co and Kimberly Clark

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

The idea behind LOreal Co ADR and Kimberly Clark 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.