Correlation Between Estee Lauder and Energizer Holdings

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

Diversification Opportunities for Estee Lauder and Energizer Holdings

0.6

Correlation Coefficient

Estee Lauder  Energizer Holdings

Poor diversification

The 3 months correlation between Estee and Energizer is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Energizer Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energizer Holdings 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 Energizer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energizer Holdings has no effect on the direction of Estee Lauder i.e., Estee Lauder and Energizer Holdings go up and down completely randomly.

Pair Corralation between Estee Lauder and Energizer Holdings

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 2.38 times more return on investment than Energizer Holdings. However, Estee Lauder is 2.38 times more volatile than Energizer Holdings. It trades about -0.05 of its potential returns per unit of risk. Energizer Holdings is currently generating about -0.18 per unit of risk. If you would invest  7,383  in Estee Lauder Companies on December 28, 2024 and sell it today you would lose (841.00) from holding Estee Lauder Companies or give up 11.39% of portfolio value over 90 days.

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

Estee Lauder Companies  vs.  Energizer Holdings

Estee Lauder Companies

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Energizer Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energizer Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Estee Lauder and Energizer Holdings

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

The idea behind Estee Lauder Companies and Energizer Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.