Correlation Between Estee Lauder and Weyco

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

Diversification Opportunities for Estee Lauder and Weyco

-0.73

Correlation Coefficient

Estee Lauder  Weyco

Pay attention - limited upside

The 3 months correlation between Estee and Weyco is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Weyco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyco Group 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 Weyco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyco Group has no effect on the direction of Estee Lauder i.e., Estee Lauder and Weyco go up and down completely randomly.

Pair Corralation between Estee Lauder and Weyco

Allowing for the 90-day total investment horizon Estee Lauder is expected to generate 1.04 times less return on investment than Weyco. But when comparing it to its historical volatility, Estee Lauder Companies is 1.17 times less risky than Weyco. It trades about 0.08 of its potential returns per unit of risk. Weyco Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,618  in Weyco Group on September 27, 2024 and sell it today you would earn a total of  111.00  from holding Weyco Group or generate 3.07% return on investment over 90 days.

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

Estee Lauder Companies  vs.  Weyco Group

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.

Weyco Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Weyco may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Estee Lauder and Weyco

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

The idea behind Estee Lauder Companies and Weyco Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.