Correlation Between Annaly Capital and Este Lauder

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

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

Diversification Opportunities for Annaly Capital and Este Lauder

0.61

Correlation Coefficient

Annaly Capital  Este Lauder

Poor diversification

The 3 months correlation between Annaly and Este is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management, and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder and Annaly Capital 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 Annaly Capital Management, are associated (or correlated) with Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of Annaly Capital i.e., Annaly Capital and Este Lauder go up and down completely randomly.

Pair Corralation between Annaly Capital and Este Lauder

Assuming the 90 days trading horizon Annaly Capital Management, is expected to generate 0.57 times more return on investment than Este Lauder. However, Annaly Capital Management, is 1.75 times less risky than Este Lauder. It trades about 0.04 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.05 per unit of risk. If you would invest  9,177  in Annaly Capital Management, on October 9, 2024 and sell it today you would earn a total of  2,358  from holding Annaly Capital Management, or generate 25.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.85%
Values	Daily Returns

Annaly Capital Management,  vs.  The Este Lauder

Annaly Capital Manag

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Annaly Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Este Lauder

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Annaly Capital and Este Lauder

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

The idea behind Annaly Capital Management, and The Este Lauder 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.