Correlation Between Estee Lauder and Vita Coco

Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Vita Coco 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 Vita Coco 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 Vita Coco, you can compare the effects of market volatilities on Estee Lauder and Vita Coco 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 Vita Coco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Vita Coco.

Diversification Opportunities for Estee Lauder and Vita Coco

0.19

Correlation Coefficient

Estee Lauder  Vita Coco

Average diversification

The 3 months correlation between Estee and Vita is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Estee Lauder i.e., Estee Lauder and Vita Coco go up and down completely randomly.

Pair Corralation between Estee Lauder and Vita Coco

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Vita Coco. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 1.01 times less risky than Vita Coco. The stock trades about -0.07 of its potential returns per unit of risk. The Vita Coco is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,691  in Vita Coco on November 19, 2024 and sell it today you would earn a total of  2,306  from holding Vita Coco or generate 136.37% return on investment over 90 days.

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

Estee Lauder Companies  vs.  Vita Coco

Estee Lauder Companies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Estee Lauder Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Estee Lauder may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Vita Coco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Estee Lauder and Vita Coco

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

The idea behind Estee Lauder Companies and Vita Coco 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.