Correlation Between Estee Lauder and Newell Brands

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

Diversification Opportunities for Estee Lauder and Newell Brands

0.67

Correlation Coefficient

Estee Lauder  Newell Brands

Poor diversification

The 3 months correlation between Estee and Newell is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 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 Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of Estee Lauder i.e., Estee Lauder and Newell Brands go up and down completely randomly.

Pair Corralation between Estee Lauder and Newell Brands

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 0.79 times more return on investment than Newell Brands. However, Estee Lauder Companies is 1.27 times less risky than Newell Brands. It trades about -0.04 of its potential returns per unit of risk. Newell Brands is currently generating about -0.17 per unit of risk. If you would invest  7,426  in Estee Lauder Companies on December 27, 2024 and sell it today you would lose (731.00) from holding Estee Lauder Companies or give up 9.84% 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.  Newell Brands

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.

Newell Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newell Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Estee Lauder and Newell Brands

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

The idea behind Estee Lauder Companies and Newell Brands 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.