Correlation Between Estee Lauder and Axalta Coating

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

By analyzing existing cross correlation between Estee Lauder Companies and Axalta Coating Systems, you can compare the effects of market volatilities on Estee Lauder and Axalta Coating 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 Estee Lauder with a short position of Axalta Coating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Axalta Coating.

Diversification Opportunities for Estee Lauder and Axalta Coating

-0.61

Correlation Coefficient

Estee Lauder  Axalta Coating

Excellent diversification

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

Pair Corralation between Estee Lauder and Axalta Coating

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 1.65 times more return on investment than Axalta Coating. However, Estee Lauder is 1.65 times more volatile than Axalta Coating Systems. It trades about 0.08 of its potential returns per unit of risk. Axalta Coating Systems is currently generating about -0.63 per unit of risk. If you would invest  7,283  in Estee Lauder Companies on September 27, 2024 and sell it today you would earn a total of  225.00  from holding Estee Lauder Companies or generate 3.09% return on investment over 90 days.

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

Estee Lauder Companies  vs.  Axalta Coating Systems

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Estee Lauder Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Axalta Coating Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axalta Coating Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Estee Lauder and Axalta Coating

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

The idea behind Estee Lauder Companies and Axalta Coating Systems 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.