Correlation Between Estee Lauder and Oil Dri

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

Diversification Opportunities for Estee Lauder and Oil Dri

-0.48

Correlation Coefficient

Estee Lauder  Oil Dri

Very good diversification

The 3 months correlation between Estee and Oil is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Oil Dri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Dri 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 Oil Dri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Dri has no effect on the direction of Estee Lauder i.e., Estee Lauder and Oil Dri go up and down completely randomly.

Pair Corralation between Estee Lauder and Oil Dri

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Oil Dri. In addition to that, Estee Lauder is 1.47 times more volatile than Oil Dri. It trades about -0.05 of its total potential returns per unit of risk. Oil Dri is currently generating about 0.04 per unit of volatility. If you would invest  4,423  in Oil Dri on December 26, 2024 and sell it today you would earn a total of  147.00  from holding Oil Dri or generate 3.32% return on investment over 90 days.

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

Estee Lauder Companies  vs.  Oil Dri

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.

Oil Dri

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Oil Dri is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Estee Lauder and Oil Dri

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

The idea behind Estee Lauder Companies and Oil Dri 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.