Correlation Between Dream Finders and Estee Lauder
Can any of the company-specific risk be diversified away by investing in both Dream Finders 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 Dream Finders and Estee Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dream Finders Homes and Estee Lauder Companies, you can compare the effects of market volatilities on Dream Finders 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 Dream Finders with a short position of Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Finders and Estee Lauder.
Diversification Opportunities for Dream Finders and Estee Lauder
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dream and Estee is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dream Finders Homes 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 Dream Finders 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 Dream Finders Homes 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 Dream Finders i.e., Dream Finders and Estee Lauder go up and down completely randomly.
Pair Corralation between Dream Finders and Estee Lauder
Considering the 90-day investment horizon Dream Finders is expected to generate 1.09 times less return on investment than Estee Lauder. In addition to that, Dream Finders is 1.46 times more volatile than Estee Lauder Companies. It trades about 0.11 of its total potential returns per unit of risk. Estee Lauder Companies is currently generating about 0.18 per unit of volatility. If you would invest 6,614 in Estee Lauder Companies on September 3, 2024 and sell it today you would earn a total of 598.00 from holding Estee Lauder Companies or generate 9.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dream Finders Homes vs. Estee Lauder Companies
Performance |
| Timeline |
| Dream Finders Homes |
| Estee Lauder Companies |
Dream Finders and Estee Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dream Finders and Estee Lauder
The main advantage of trading using opposite Dream Finders and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dream Finders 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.| Dream Finders vs. TRI Pointe Homes | Dream Finders vs. Beazer Homes USA | Dream Finders vs. Century Communities | Dream Finders vs. Meritage |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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