Correlation Between Estee Lauder and FTAI Aviation

Can any of the company-specific risk be diversified away by investing in both Estee Lauder and FTAI Aviation 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 FTAI Aviation 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 FTAI Aviation Ltd, you can compare the effects of market volatilities on Estee Lauder and FTAI Aviation 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 FTAI Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and FTAI Aviation.

Diversification Opportunities for Estee Lauder and FTAI Aviation

-0.65

Correlation Coefficient

Estee Lauder  FTAI Aviation

Excellent diversification

The 3 months correlation between Estee and FTAI is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation 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 FTAI Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Aviation has no effect on the direction of Estee Lauder i.e., Estee Lauder and FTAI Aviation go up and down completely randomly.

Pair Corralation between Estee Lauder and FTAI Aviation

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the FTAI Aviation. In addition to that, Estee Lauder is 4.19 times more volatile than FTAI Aviation Ltd. It trades about -0.07 of its total potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.09 per unit of volatility. If you would invest  2,286  in FTAI Aviation Ltd on September 27, 2024 and sell it today you would earn a total of  364.00  from holding FTAI Aviation Ltd or generate 15.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

Estee Lauder Companies  vs.  FTAI Aviation Ltd

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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

FTAI Aviation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, FTAI Aviation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Estee Lauder and FTAI Aviation

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

The idea behind Estee Lauder Companies and FTAI Aviation Ltd 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.