Correlation Between Estee Lauder and FG Merger

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

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

Diversification Opportunities for Estee Lauder and FG Merger

0.54

Correlation Coefficient

Estee Lauder  FG Merger

Very weak diversification

The 3 months correlation between Estee and FGMCW is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and FG Merger Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FG Merger Corp and Estee Lauder 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 Estee Lauder Companies are associated (or correlated) with FG Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FG Merger Corp has no effect on the direction of Estee Lauder i.e., Estee Lauder and FG Merger go up and down completely randomly.

Pair Corralation between Estee Lauder and FG Merger

If you would invest  6,452  in Estee Lauder Companies on September 15, 2024 and sell it today you would earn a total of  1,552  from holding Estee Lauder Companies or generate 24.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Estee Lauder Companies  vs.  FG Merger Corp

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 quite persistent essential indicators, Estee Lauder is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

FG Merger Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FG Merger Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, FG Merger is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Estee Lauder and FG Merger

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

The idea behind Estee Lauder Companies and FG Merger Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.