Correlation Between Estee Lauder and Hims Hers

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

Diversification Opportunities for Estee Lauder and Hims Hers

-0.31

Correlation Coefficient

Estee Lauder  Hims Hers

Very good diversification

The 3 months correlation between Estee and Hims is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Hims Hers Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hims Hers Health 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 Hims Hers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hims Hers Health has no effect on the direction of Estee Lauder i.e., Estee Lauder and Hims Hers go up and down completely randomly.

Pair Corralation between Estee Lauder and Hims Hers

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Hims Hers. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 2.53 times less risky than Hims Hers. The stock trades about -0.05 of its potential returns per unit of risk. The Hims Hers Health is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,656  in Hims Hers Health on December 27, 2024 and sell it today you would earn a total of  680.00  from holding Hims Hers Health or generate 25.6% return on investment over 90 days.

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

Estee Lauder Companies  vs.  Hims Hers Health

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.

Hims Hers Health

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hims Hers Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Hims Hers unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Estee Lauder and Hims Hers

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

The idea behind Estee Lauder Companies and Hims Hers Health 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.