Correlation Between Estee Lauder and 191216DC1

Can any of the company-specific risk be diversified away by investing in both Estee Lauder and 191216DC1 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 191216DC1 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 COCA COLA CO, you can compare the effects of market volatilities on Estee Lauder and 191216DC1 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 191216DC1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and 191216DC1.

Diversification Opportunities for Estee Lauder and 191216DC1

0.33

Correlation Coefficient

Estee Lauder  191216DC1

Weak diversification

The 3 months correlation between Estee and 191216DC1 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216DC1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of Estee Lauder i.e., Estee Lauder and 191216DC1 go up and down completely randomly.

Pair Corralation between Estee Lauder and 191216DC1

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the 191216DC1. In addition to that, Estee Lauder is 1.68 times more volatile than COCA COLA CO. It trades about -0.06 of its total potential returns per unit of risk. COCA COLA CO is currently generating about 0.0 per unit of volatility. If you would invest  6,676  in COCA COLA CO on October 3, 2024 and sell it today you would lose (294.00) from holding COCA COLA CO or give up 4.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.17%
Values	Daily Returns

Estee Lauder Companies  vs.  COCA COLA 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 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.

COCA A CO

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COCA COLA CO are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, 191216DC1 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Estee Lauder and 191216DC1

The main advantage of trading using opposite Estee Lauder and 191216DC1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, 191216DC1 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 191216DC1 will offset losses from the drop in 191216DC1's long position.

The idea behind Estee Lauder Companies and COCA COLA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.