Correlation Between Helen Of and Estee Lauder

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

By analyzing existing cross correlation between Helen of Troy and Estee Lauder Companies, you can compare the effects of market volatilities on Helen Of and Estee Lauder 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 Helen Of with a short position of Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Helen Of and Estee Lauder.

Diversification Opportunities for Helen Of and Estee Lauder

-0.24

Correlation Coefficient

Helen Of  Estee Lauder

Very good diversification

The 3 months correlation between Helen and Estee is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Helen of Troy and Estee Lauder Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estee Lauder Companies and Helen Of 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 Helen of Troy are associated (or correlated) with Estee Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estee Lauder Companies has no effect on the direction of Helen Of i.e., Helen Of and Estee Lauder go up and down completely randomly.

Pair Corralation between Helen Of and Estee Lauder

Given the investment horizon of 90 days Helen Of is expected to generate 5.02 times less return on investment than Estee Lauder. But when comparing it to its historical volatility, Helen of Troy is 1.22 times less risky than Estee Lauder. It trades about 0.14 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about 0.59 of returns per unit of risk over similar time horizon. If you would invest  6,244  in Estee Lauder Companies on September 13, 2024 and sell it today you would earn a total of  1,858  from holding Estee Lauder Companies or generate 29.76% return on investment over 90 days.

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

Helen of Troy  vs.  Estee Lauder Companies

Helen of Troy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Helen of Troy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Helen Of exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 quite persistent essential indicators, Estee Lauder is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Helen Of and Estee Lauder

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

The idea behind Helen of Troy and Estee Lauder Companies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.