Correlation Between Beiersdorf and Essity AB
Can any of the company-specific risk be diversified away by investing in both Beiersdorf and Essity AB 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 Beiersdorf and Essity AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beiersdorf AG ADR and Essity AB, you can compare the effects of market volatilities on Beiersdorf and Essity AB 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 Beiersdorf with a short position of Essity AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beiersdorf and Essity AB.
Diversification Opportunities for Beiersdorf and Essity AB
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beiersdorf and Essity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Beiersdorf AG ADR and Essity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essity AB and Beiersdorf 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 Beiersdorf AG ADR are associated (or correlated) with Essity AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essity AB has no effect on the direction of Beiersdorf i.e., Beiersdorf and Essity AB go up and down completely randomly.
Pair Corralation between Beiersdorf and Essity AB
Assuming the 90 days horizon Beiersdorf is expected to generate 41.79 times less return on investment than Essity AB. But when comparing it to its historical volatility, Beiersdorf AG ADR is 17.23 times less risky than Essity AB. It trades about 0.03 of its potential returns per unit of risk. Essity AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,558 in Essity AB on September 3, 2024 and sell it today you would earn a total of 75.00 from holding Essity AB or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 71.92% |
| Values | Daily Returns |
Beiersdorf AG ADR vs. Essity AB
Performance |
| Timeline |
| Beiersdorf AG ADR |
| Essity AB |
Beiersdorf and Essity AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beiersdorf and Essity AB
The main advantage of trading using opposite Beiersdorf and Essity AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beiersdorf position performs unexpectedly, Essity AB 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 Essity AB will offset losses from the drop in Essity AB's long position.| Beiersdorf vs. Kao Corp ADR | Beiersdorf vs. Henkel AG Co | Beiersdorf vs. Henkel Ag A | Beiersdorf vs. Carlsberg AS |
| Essity AB vs. LOral SA | Essity AB vs. LOreal Co ADR | Essity AB vs. Unilever PLC ADR | Essity AB vs. Kimberly Clark |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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