Correlation Between Estee Lauder and Kimberly Clark

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

Diversification Opportunities for Estee Lauder and Kimberly Clark

-0.25

Correlation Coefficient

Estee Lauder  Kimberly Clark

Very good diversification

The 3 months correlation between Estee and Kimberly is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark 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 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 Estee Lauder i.e., Estee Lauder and Kimberly Clark go up and down completely randomly.

Pair Corralation between Estee Lauder and Kimberly Clark

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 2.95 times more return on investment than Kimberly Clark. However, Estee Lauder is 2.95 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 0.04 per unit of risk. If you would invest  7,361  in Estee Lauder Companies on November 27, 2024 and sell it today you would earn a total of  115.00  from holding Estee Lauder Companies or generate 1.56% 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.  Kimberly Clark

Estee Lauder Companies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Estee Lauder Companies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Estee Lauder is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Kimberly Clark

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Estee Lauder and Kimberly Clark

The main advantage of trading using opposite Estee Lauder and Kimberly Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder 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 Estee Lauder Companies 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.