Correlation Between Analog Devices and Estee Lauder
Can any of the company-specific risk be diversified away by investing in both Analog Devices 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 Analog Devices and Estee Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and Estee Lauder Companies, you can compare the effects of market volatilities on Analog Devices 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 Analog Devices with a short position of Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Estee Lauder.
Diversification Opportunities for Analog Devices and Estee Lauder
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Analog and Estee is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices 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 Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and Estee Lauder go up and down completely randomly.
Pair Corralation between Analog Devices and Estee Lauder
Considering the 90-day investment horizon Analog Devices is expected to generate 0.74 times more return on investment than Estee Lauder. However, Analog Devices is 1.35 times less risky than Estee Lauder. It trades about -0.01 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.13 per unit of risk. If you would invest 23,032 in Analog Devices on August 31, 2024 and sell it today you would lose (1,227) from holding Analog Devices or give up 5.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. Estee Lauder Companies
Performance |
| Timeline |
| Analog Devices |
| Estee Lauder Companies |
Analog Devices and Estee Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Estee Lauder
The main advantage of trading using opposite Analog Devices and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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.| Analog Devices vs. MACOM Technology Solutions | Analog Devices vs. FormFactor | Analog Devices vs. MaxLinear | Analog Devices vs. nLIGHT Inc |
| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
Check out your portfolio center.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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