Correlation Between ELF Beauty and Estee Lauder

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

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

Diversification Opportunities for ELF Beauty and Estee Lauder

0.37

Correlation Coefficient

ELF Beauty  Estee Lauder

Weak diversification

The 3 months correlation between ELF and Estee is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ELF Beauty and Estee Lauder Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estee Lauder Companies and ELF Beauty 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 ELF Beauty are associated (or correlated) with Estee Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estee Lauder Companies has no effect on the direction of ELF Beauty i.e., ELF Beauty and Estee Lauder go up and down completely randomly.

Pair Corralation between ELF Beauty and Estee Lauder

Considering the 90-day investment horizon ELF Beauty is expected to under-perform the Estee Lauder. In addition to that, ELF Beauty is 1.37 times more volatile than Estee Lauder Companies. It trades about -0.21 of its total potential returns per unit of risk. Estee Lauder Companies is currently generating about 0.04 per unit of volatility. If you would invest  7,212  in Estee Lauder Companies on November 28, 2024 and sell it today you would earn a total of  266.00  from holding Estee Lauder Companies or generate 3.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ELF Beauty  vs.  Estee Lauder Companies

ELF Beauty

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELF Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Estee Lauder Companies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Estee Lauder Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Estee Lauder may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with ELF Beauty and Estee Lauder

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

The idea behind ELF Beauty and Estee Lauder Companies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..