Correlation Between Estee Lauder and Stephan

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

Diversification Opportunities for Estee Lauder and Stephan

-0.52

Correlation Coefficient

Estee Lauder  Stephan

Excellent diversification

The 3 months correlation between Estee and Stephan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and The Stephan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Stephan 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 Stephan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Stephan has no effect on the direction of Estee Lauder i.e., Estee Lauder and Stephan go up and down completely randomly.

Pair Corralation between Estee Lauder and Stephan

If you would invest  164.00  in The Stephan Co on September 16, 2024 and sell it today you would earn a total of  0.00  from holding The Stephan Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.54%
Values	Daily Returns

Estee Lauder Companies  vs.  The Stephan Co

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 quite persistent essential indicators, Estee Lauder is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

The Stephan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Stephan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Stephan is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Estee Lauder and Stephan

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

The idea behind Estee Lauder Companies and The Stephan Co 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.