Correlation Between Este Lauder and Frequentis

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

Diversification Opportunities for Este Lauder and Frequentis

0.74

Correlation Coefficient

Este Lauder  Frequentis

Poor diversification

The 3 months correlation between Este and Frequentis is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and Frequentis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frequentis AG 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 Frequentis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frequentis AG has no effect on the direction of Este Lauder i.e., Este Lauder and Frequentis go up and down completely randomly.

Pair Corralation between Este Lauder and Frequentis

Assuming the 90 days trading horizon The Este Lauder is expected to under-perform the Frequentis. In addition to that, Este Lauder is 1.99 times more volatile than Frequentis AG. It trades about -0.03 of its total potential returns per unit of risk. Frequentis AG is currently generating about -0.04 per unit of volatility. If you would invest  2,770  in Frequentis AG on September 5, 2024 and sell it today you would lose (150.00) from holding Frequentis AG or give up 5.42% of portfolio value over 90 days.

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

The Este Lauder  vs.  Frequentis AG

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 fairly strong forward indicators, Este Lauder is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Frequentis AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frequentis AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Frequentis is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Este Lauder and Frequentis

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

The idea behind The Este Lauder and Frequentis AG 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.