Correlation Between Honest and Estee Lauder

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

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

Diversification Opportunities for Honest and Estee Lauder

0.5

Correlation Coefficient

Honest  Estee Lauder

Very weak diversification

The 3 months correlation between Honest and Estee is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company 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 Honest 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 Honest Company 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 Honest i.e., Honest and Estee Lauder go up and down completely randomly.

Pair Corralation between Honest and Estee Lauder

Given the investment horizon of 90 days Honest Company is expected to under-perform the Estee Lauder. In addition to that, Honest is 1.12 times more volatile than Estee Lauder Companies. It trades about -0.13 of its total potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.03 per unit of volatility. If you would invest  7,383  in Estee Lauder Companies on December 28, 2024 and sell it today you would lose (688.00) from holding Estee Lauder Companies or give up 9.32% of portfolio value over 90 days.

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

Honest Company  vs.  Estee Lauder Companies

Honest Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honest Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 Honest and Estee Lauder

The main advantage of trading using opposite Honest and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honest 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 Honest Company 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.