Correlation Between Estee Lauder and TRAVELERS

Can any of the company-specific risk be diversified away by investing in both Estee Lauder and TRAVELERS 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 TRAVELERS 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 TRAVELERS INC 4, you can compare the effects of market volatilities on Estee Lauder and TRAVELERS 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 TRAVELERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and TRAVELERS.

Diversification Opportunities for Estee Lauder and TRAVELERS

0.27

Correlation Coefficient

Estee Lauder  TRAVELERS

Modest diversification

The 3 months correlation between Estee and TRAVELERS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and TRAVELERS INC 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVELERS INC 4 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 TRAVELERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVELERS INC 4 has no effect on the direction of Estee Lauder i.e., Estee Lauder and TRAVELERS go up and down completely randomly.

Pair Corralation between Estee Lauder and TRAVELERS

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 1.97 times more return on investment than TRAVELERS. However, Estee Lauder is 1.97 times more volatile than TRAVELERS INC 4. It trades about 0.0 of its potential returns per unit of risk. TRAVELERS INC 4 is currently generating about -0.08 per unit of risk. If you would invest  8,473  in Estee Lauder Companies on September 16, 2024 and sell it today you would lose (469.00) from holding Estee Lauder Companies or give up 5.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	58.46%
Values	Daily Returns

Estee Lauder Companies  vs.  TRAVELERS INC 4

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.

TRAVELERS INC 4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRAVELERS INC 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for TRAVELERS INC 4 investors.

Pair Trading with Estee Lauder and TRAVELERS

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

The idea behind Estee Lauder Companies and TRAVELERS INC 4 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.