Correlation Between Estee Lauder and Kroger

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

Diversification Opportunities for Estee Lauder and Kroger

-0.74

Correlation Coefficient

Estee Lauder  Kroger

Pay attention - limited upside

The 3 months correlation between Estee and Kroger is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Estee Lauder i.e., Estee Lauder and Kroger go up and down completely randomly.

Pair Corralation between Estee Lauder and Kroger

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Kroger. In addition to that, Estee Lauder is 2.21 times more volatile than Kroger Company. It trades about -0.05 of its total potential returns per unit of risk. Kroger Company is currently generating about 0.05 per unit of volatility. If you would invest  6,204  in Kroger Company on December 27, 2024 and sell it today you would earn a total of  230.00  from holding Kroger Company or generate 3.71% 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.  Kroger Company

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.

Kroger Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Kroger is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Estee Lauder and Kroger

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

The idea behind Estee Lauder Companies and Kroger Company 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.