Correlation Between Estee Lauder and World Houseware

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

Diversification Opportunities for Estee Lauder and World Houseware

0.0

Correlation Coefficient

Estee Lauder  World Houseware

Pay attention - limited upside

The 3 months correlation between Estee and World is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and World Houseware Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Houseware 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 World Houseware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Houseware has no effect on the direction of Estee Lauder i.e., Estee Lauder and World Houseware go up and down completely randomly.

Pair Corralation between Estee Lauder and World Houseware

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the World Houseware. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 1.57 times less risky than World Houseware. The stock trades about -0.08 of its potential returns per unit of risk. The World Houseware Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  9.00  in World Houseware Limited on September 29, 2024 and sell it today you would lose (4.00) from holding World Houseware Limited or give up 44.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Estee Lauder Companies  vs.  World Houseware Limited

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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

World Houseware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Houseware Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, World Houseware is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Estee Lauder and World Houseware

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

The idea behind Estee Lauder Companies and World Houseware Limited 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 CEOs Directory module to screen CEOs from public companies around the world.