Correlation Between Este Lauder and Coty

Can any of the company-specific risk be diversified away by investing in both Este Lauder and Coty 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 Este Lauder and Coty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Este Lauder and Coty Inc, you can compare the effects of market volatilities on Este Lauder and Coty 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 Este Lauder with a short position of Coty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Este Lauder and Coty.

Diversification Opportunities for Este Lauder and Coty

0.7

Correlation Coefficient

Este Lauder  Coty

Poor diversification

The 3 months correlation between Este and Coty is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc and Este 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 The Este Lauder are associated (or correlated) with Coty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coty Inc has no effect on the direction of Este Lauder i.e., Este Lauder and Coty go up and down completely randomly.

Pair Corralation between Este Lauder and Coty

Assuming the 90 days trading horizon The Este Lauder is expected to generate 1.65 times more return on investment than Coty. However, Este Lauder is 1.65 times more volatile than Coty Inc. It trades about 0.04 of its potential returns per unit of risk. Coty Inc is currently generating about -0.03 per unit of risk. If you would invest  1,984  in The Este Lauder on September 12, 2024 and sell it today you would earn a total of  94.00  from holding The Este Lauder or generate 4.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

The Este Lauder  vs.  Coty Inc

Este Lauder

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Este Lauder are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Este Lauder may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Coty Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Este Lauder and Coty

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

The idea behind The Este Lauder and Coty Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.