Correlation Between Estee Lauder and Papaya Growth

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

Diversification Opportunities for Estee Lauder and Papaya Growth

-0.15

Correlation Coefficient

Estee Lauder  Papaya Growth

Good diversification

The 3 months correlation between Estee and Papaya is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity 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 Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of Estee Lauder i.e., Estee Lauder and Papaya Growth go up and down completely randomly.

Pair Corralation between Estee Lauder and Papaya Growth

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Papaya Growth. In addition to that, Estee Lauder is 2.72 times more volatile than Papaya Growth Opportunity. It trades about -0.1 of its total potential returns per unit of risk. Papaya Growth Opportunity is currently generating about -0.02 per unit of volatility. If you would invest  1,158  in Papaya Growth Opportunity on September 23, 2024 and sell it today you would lose (39.00) from holding Papaya Growth Opportunity or give up 3.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Estee Lauder Companies  vs.  Papaya Growth Opportunity

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 latest uncertain performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Estee Lauder and Papaya Growth

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

The idea behind Estee Lauder Companies and Papaya Growth Opportunity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..