Correlation Between Procter Gamble and Este Lauder

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

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

Diversification Opportunities for Procter Gamble and Este Lauder

-0.24

Correlation Coefficient

Procter Gamble  Este Lauder

Very good diversification

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

Pair Corralation between Procter Gamble and Este Lauder

Assuming the 90 days horizon The Procter Gamble is expected to generate 0.31 times more return on investment than Este Lauder. However, The Procter Gamble is 3.26 times less risky than Este Lauder. It trades about 0.04 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.07 per unit of risk. If you would invest  15,498  in The Procter Gamble on September 24, 2024 and sell it today you would earn a total of  722.00  from holding The Procter Gamble or generate 4.66% return on investment over 90 days.

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

The Procter Gamble  vs.  The Este Lauder

Procter Gamble

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Procter Gamble are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Procter Gamble and Este Lauder

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

The idea behind The Procter Gamble and The Este Lauder 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.