Correlation Between Coty and Estee Lauder
Can any of the company-specific risk be diversified away by investing in both Coty 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 Coty and Estee Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Estee Lauder Companies, you can compare the effects of market volatilities on Coty 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 Coty with a short position of Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Estee Lauder.
Diversification Opportunities for Coty and Estee Lauder
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coty and Estee is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc 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 Coty 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 Coty Inc 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 Coty i.e., Coty and Estee Lauder go up and down completely randomly.
Pair Corralation between Coty and Estee Lauder
Given the investment horizon of 90 days Coty Inc is expected to generate 0.37 times more return on investment than Estee Lauder. However, Coty Inc is 2.67 times less risky than Estee Lauder. It trades about -0.09 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.18 per unit of risk. If you would invest 760.00 in Coty Inc on August 24, 2024 and sell it today you would lose (30.00) from holding Coty Inc or give up 3.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. Estee Lauder Companies
Performance |
| Timeline |
| Coty Inc |
| Estee Lauder Companies |
Coty and Estee Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Estee Lauder
The main advantage of trading using opposite Coty and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty 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 Coty Inc 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.| Estee Lauder vs. Eshallgo Class A | Estee Lauder vs. Amtech Systems | Estee Lauder vs. Gold Fields Ltd | Estee Lauder vs. Aegean Airlines SA |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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