Correlation Between Estee Lauder and INGERSOLL

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

Diversification Opportunities for Estee Lauder and INGERSOLL

0.38

Correlation Coefficient

Estee Lauder  INGERSOLL

Weak diversification

The 3 months correlation between Estee and INGERSOLL is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and INGERSOLL RAND LUXEMBOURG FINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGERSOLL RAND LUXEM 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 INGERSOLL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGERSOLL RAND LUXEM has no effect on the direction of Estee Lauder i.e., Estee Lauder and INGERSOLL go up and down completely randomly.

Pair Corralation between Estee Lauder and INGERSOLL

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the INGERSOLL. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 17.54 times less risky than INGERSOLL. The stock trades about -0.07 of its potential returns per unit of risk. The INGERSOLL RAND LUXEMBOURG FINANCE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,226  in INGERSOLL RAND LUXEMBOURG FINANCE on September 20, 2024 and sell it today you would earn a total of  259.00  from holding INGERSOLL RAND LUXEMBOURG FINANCE or generate 2.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.34%
Values	Daily Returns

Estee Lauder Companies  vs.  INGERSOLL RAND LUXEMBOURG FINA

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 unsteady 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.

INGERSOLL RAND LUXEM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGERSOLL RAND LUXEMBOURG FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INGERSOLL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Estee Lauder and INGERSOLL

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

The idea behind Estee Lauder Companies and INGERSOLL RAND LUXEMBOURG FINANCE 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.