Correlation Between Gap, and Estee Lauder

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

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

Diversification Opportunities for Gap, and Estee Lauder

0.69

Correlation Coefficient

Gap,  Estee Lauder

Poor diversification

The 3 months correlation between Gap, and Estee is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, 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 Gap, 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 Gap, 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 Gap, i.e., Gap, and Estee Lauder go up and down completely randomly.

Pair Corralation between Gap, and Estee Lauder

Considering the 90-day investment horizon The Gap, is expected to generate 1.15 times more return on investment than Estee Lauder. However, Gap, is 1.15 times more volatile than Estee Lauder Companies. It trades about -0.04 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.05 per unit of risk. If you would invest  2,440  in The Gap, on December 26, 2024 and sell it today you would lose (284.00) from holding The Gap, or give up 11.64% of portfolio value over 90 days.

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

The Gap,  vs.  Estee Lauder Companies

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Estee Lauder Companies

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Gap, and Estee Lauder

The main advantage of trading using opposite Gap, and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Commodity Directory module to find actively traded commodities issued by global exchanges.