Correlation Between Este Lauder and Natura Co

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

By analyzing existing cross correlation between The Este Lauder and Natura Co Holding, you can compare the effects of market volatilities on Este Lauder and Natura Co 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 Este Lauder with a short position of Natura Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Este Lauder and Natura Co.

Diversification Opportunities for Este Lauder and Natura Co

0.14

Correlation Coefficient

Este Lauder  Natura Co

Average diversification

The 3 months correlation between Este and Natura is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and Natura Co Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura Co Holding and Este 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 The Este Lauder are associated (or correlated) with Natura Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura Co Holding has no effect on the direction of Este Lauder i.e., Este Lauder and Natura Co go up and down completely randomly.

Pair Corralation between Este Lauder and Natura Co

Assuming the 90 days trading horizon The Este Lauder is expected to under-perform the Natura Co. In addition to that, Este Lauder is 1.44 times more volatile than Natura Co Holding. It trades about -0.02 of its total potential returns per unit of risk. Natura Co Holding is currently generating about 0.01 per unit of volatility. If you would invest  1,327  in Natura Co Holding on September 25, 2024 and sell it today you would lose (15.00) from holding Natura Co Holding or give up 1.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

The Este Lauder  vs.  Natura Co Holding

Este Lauder

Risk-Adjusted Performance

0 of 100

Very Weak

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

Natura Co Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natura Co Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Natura Co is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Este Lauder and Natura Co

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

The idea behind The Este Lauder and Natura Co Holding 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 CEOs Directory module to screen CEOs from public companies around the world.