Correlation Between Este Lauder and Mayr Melnhof

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

Diversification Opportunities for Este Lauder and Mayr Melnhof

0.72

Correlation Coefficient

Este Lauder  Mayr Melnhof

Poor diversification

The 3 months correlation between Este and Mayr is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and Mayr Melnhof Karton AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayr Melnhof Karton 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 Mayr Melnhof. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayr Melnhof Karton has no effect on the direction of Este Lauder i.e., Este Lauder and Mayr Melnhof go up and down completely randomly.

Pair Corralation between Este Lauder and Mayr Melnhof

Assuming the 90 days trading horizon The Este Lauder is expected to generate 1.89 times more return on investment than Mayr Melnhof. However, Este Lauder is 1.89 times more volatile than Mayr Melnhof Karton AG. It trades about -0.07 of its potential returns per unit of risk. Mayr Melnhof Karton AG is currently generating about -0.24 per unit of risk. If you would invest  8,379  in The Este Lauder on September 2, 2024 and sell it today you would lose (1,539) from holding The Este Lauder or give up 18.37% 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.  Mayr Melnhof Karton 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 inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Mayr Melnhof Karton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mayr Melnhof Karton AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Este Lauder and Mayr Melnhof

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

The idea behind The Este Lauder and Mayr Melnhof Karton 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.