Correlation Between Rocky Brands and Estee Lauder

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

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

Diversification Opportunities for Rocky Brands and Estee Lauder

0.9

Correlation Coefficient

Rocky Brands  Estee Lauder

Almost no diversification

The 3 months correlation between Rocky and Estee is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands 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 Rocky Brands 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 Rocky Brands 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 Rocky Brands i.e., Rocky Brands and Estee Lauder go up and down completely randomly.

Pair Corralation between Rocky Brands and Estee Lauder

Given the investment horizon of 90 days Rocky Brands is expected to generate 1.6 times more return on investment than Estee Lauder. However, Rocky Brands is 1.6 times more volatile than Estee Lauder Companies. It trades about 0.02 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.08 per unit of risk. If you would invest  2,500  in Rocky Brands on September 25, 2024 and sell it today you would lose (222.00) from holding Rocky Brands or give up 8.88% of portfolio value over 90 days.

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

Rocky Brands  vs.  Estee Lauder Companies

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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 current disturbance may also be a sign of long term up-swing for the company investors.

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 uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Rocky Brands and Estee Lauder

The main advantage of trading using opposite Rocky Brands and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Brands 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 Rocky Brands 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.