Correlation Between SPARTAN STORES and Este Lauder

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

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

Diversification Opportunities for SPARTAN STORES and Este Lauder

0.35

Correlation Coefficient

SPARTAN STORES  Este Lauder

Weak diversification

The 3 months correlation between SPARTAN and Este is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder and SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES i.e., SPARTAN STORES and Este Lauder go up and down completely randomly.

Pair Corralation between SPARTAN STORES and Este Lauder

Assuming the 90 days trading horizon SPARTAN STORES is expected to generate 0.74 times more return on investment than Este Lauder. However, SPARTAN STORES is 1.35 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 -0.07 per unit of risk. If you would invest  2,691  in SPARTAN STORES on October 27, 2024 and sell it today you would lose (1,001) from holding SPARTAN STORES or give up 37.2% of portfolio value over 90 days.

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

SPARTAN STORES  vs.  The Este Lauder

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 nearly stable basic indicators, Este Lauder is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPARTAN STORES and Este Lauder

The main advantage of trading using opposite SPARTAN STORES and Este Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN STORES 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 SPARTAN STORES 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.