Correlation Between Este Lauder and Procter Gamble

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

Diversification Opportunities for Este Lauder and Procter Gamble

-0.25

Correlation Coefficient

Este Lauder  Procter Gamble

Very good diversification

The 3 months correlation between Este and Procter is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Este Lauder i.e., Este Lauder and Procter Gamble go up and down completely randomly.

Pair Corralation between Este Lauder and Procter Gamble

Assuming the 90 days trading horizon The Este Lauder is expected to generate 1.59 times more return on investment than Procter Gamble. However, Este Lauder is 1.59 times more volatile than The Procter Gamble. It trades about 0.49 of its potential returns per unit of risk. The Procter Gamble is currently generating about 0.17 per unit of risk. If you would invest  1,557  in The Este Lauder on September 15, 2024 and sell it today you would earn a total of  493.00  from holding The Este Lauder or generate 31.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

The Este Lauder  vs.  The Procter Gamble

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.

Procter Gamble

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Procter Gamble are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Este Lauder and Procter Gamble

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

The idea behind The Este Lauder and The Procter Gamble 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.