Correlation Between Estee Lauder and Acme United
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Acme United 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 Estee Lauder and Acme United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Estee Lauder Companies and Acme United, you can compare the effects of market volatilities on Estee Lauder and Acme United 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 Estee Lauder with a short position of Acme United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Acme United.
Diversification Opportunities for Estee Lauder and Acme United
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Estee and Acme is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Acme United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acme United and Estee Lauder 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 Estee Lauder Companies are associated (or correlated) with Acme United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acme United has no effect on the direction of Estee Lauder i.e., Estee Lauder and Acme United go up and down completely randomly.
Pair Corralation between Estee Lauder and Acme United
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Acme United. In addition to that, Estee Lauder is 2.73 times more volatile than Acme United. It trades about -0.13 of its total potential returns per unit of risk. Acme United is currently generating about 0.24 per unit of volatility. If you would invest 4,026 in Acme United on August 30, 2024 and sell it today you would earn a total of 409.00 from holding Acme United or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. Acme United
Performance |
| Timeline |
| Estee Lauder Companies |
| Acme United |
Estee Lauder and Acme United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Acme United
The main advantage of trading using opposite Estee Lauder and Acme United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Acme United 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 Acme United will offset losses from the drop in Acme United's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Acme United vs. Mannatech Incorporated | Acme United vs. European Wax Center | Acme United vs. Inter Parfums | Acme United vs. Spectrum Brands Holdings |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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