Correlation Between ABBVIE and Estee Lauder

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

By analyzing existing cross correlation between ABBVIE INC 445 and Estee Lauder Companies, you can compare the effects of market volatilities on ABBVIE 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 ABBVIE with a short position of Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABBVIE and Estee Lauder.

Diversification Opportunities for ABBVIE and Estee Lauder

0.51

Correlation Coefficient

ABBVIE  Estee Lauder

Very weak diversification

The 3 months correlation between ABBVIE and Estee is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ABBVIE INC 445 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 ABBVIE 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 ABBVIE INC 445 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 ABBVIE i.e., ABBVIE and Estee Lauder go up and down completely randomly.

Pair Corralation between ABBVIE and Estee Lauder

Assuming the 90 days trading horizon ABBVIE INC 445 is expected to generate 0.22 times more return on investment than Estee Lauder. However, ABBVIE INC 445 is 4.61 times less risky than Estee Lauder. It trades about -0.06 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.13 per unit of risk. If you would invest  8,845  in ABBVIE INC 445 on August 30, 2024 and sell it today you would lose (142.00) from holding ABBVIE INC 445 or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

ABBVIE INC 445  vs.  Estee Lauder Companies

ABBVIE INC 445

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABBVIE INC 445 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ABBVIE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with ABBVIE and Estee Lauder

The main advantage of trading using opposite ABBVIE and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABBVIE 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 ABBVIE INC 445 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.