Correlation Between Este Lauder and Kimberly Clark

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

Diversification Opportunities for Este Lauder and Kimberly Clark

-0.42

Correlation Coefficient

Este Lauder  Kimberly Clark

Very good diversification

The 3 months correlation between Este and Kimberly is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of Este Lauder i.e., Este Lauder and Kimberly Clark go up and down completely randomly.

Pair Corralation between Este Lauder and Kimberly Clark

Assuming the 90 days trading horizon The Este Lauder is expected to under-perform the Kimberly Clark. In addition to that, Este Lauder is 1.9 times more volatile than Kimberly Clark. It trades about -0.09 of its total potential returns per unit of risk. Kimberly Clark is currently generating about -0.02 per unit of volatility. If you would invest  81,272  in Kimberly Clark on December 26, 2024 and sell it today you would lose (2,351) from holding Kimberly Clark or give up 2.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

The Este Lauder  vs.  Kimberly Clark

Este Lauder

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Este Lauder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kimberly Clark

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kimberly Clark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Kimberly Clark 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 Kimberly Clark

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

The idea behind The Este Lauder and Kimberly Clark 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 Global Correlations module to find global opportunities by holding instruments from different markets.