Correlation Between Estee Lauder and Primo Brands

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

Diversification Opportunities for Estee Lauder and Primo Brands

-0.36

Correlation Coefficient

Estee Lauder  Primo Brands

Very good diversification

The 3 months correlation between Estee and Primo is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo 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 Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of Estee Lauder i.e., Estee Lauder and Primo Brands go up and down completely randomly.

Pair Corralation between Estee Lauder and Primo Brands

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Primo Brands. In addition to that, Estee Lauder is 1.64 times more volatile than Primo Brands. It trades about -0.1 of its total potential returns per unit of risk. Primo Brands is currently generating about 0.2 per unit of volatility. If you would invest  2,411  in Primo Brands on October 3, 2024 and sell it today you would earn a total of  646.00  from holding Primo Brands or generate 26.79% 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.  Primo Brands

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Primo Brands

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Primo Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Estee Lauder and Primo Brands

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

The idea behind Estee Lauder Companies and Primo 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.