Correlation Between Estee Lauder and Radcom

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

Diversification Opportunities for Estee Lauder and Radcom

-0.16

Correlation Coefficient

Estee Lauder  Radcom

Good diversification

The 3 months correlation between Estee and Radcom is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Estee Lauder i.e., Estee Lauder and Radcom go up and down completely randomly.

Pair Corralation between Estee Lauder and Radcom

Allowing for the 90-day total investment horizon Estee Lauder is expected to generate 4.75 times less return on investment than Radcom. But when comparing it to its historical volatility, Estee Lauder Companies is 2.44 times less risky than Radcom. It trades about 0.14 of its potential returns per unit of risk. Radcom is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,160  in Radcom on October 20, 2024 and sell it today you would earn a total of  248.00  from holding Radcom or generate 21.38% 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.  Radcom

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 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.

Radcom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Estee Lauder and Radcom

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

The idea behind Estee Lauder Companies and Radcom 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.