Correlation Between Estee Lauder and Beiersdorf
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Beiersdorf 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 Beiersdorf 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 Beiersdorf AG ADR, you can compare the effects of market volatilities on Estee Lauder and Beiersdorf 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 Beiersdorf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Beiersdorf.
Diversification Opportunities for Estee Lauder and Beiersdorf
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Estee and Beiersdorf is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Beiersdorf AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beiersdorf AG ADR 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 Beiersdorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beiersdorf AG ADR has no effect on the direction of Estee Lauder i.e., Estee Lauder and Beiersdorf go up and down completely randomly.
Pair Corralation between Estee Lauder and Beiersdorf
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 2.0 times more return on investment than Beiersdorf. However, Estee Lauder is 2.0 times more volatile than Beiersdorf AG ADR. It trades about 0.31 of its potential returns per unit of risk. Beiersdorf AG ADR is currently generating about -0.01 per unit of risk. If you would invest 6,448 in Estee Lauder Companies on September 20, 2024 and sell it today you would earn a total of 1,048 from holding Estee Lauder Companies or generate 16.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Estee Lauder Companies vs. Beiersdorf AG ADR
Performance |
| Timeline |
| Estee Lauder Companies |
| Beiersdorf AG ADR |
Estee Lauder and Beiersdorf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Beiersdorf
The main advantage of trading using opposite Estee Lauder and Beiersdorf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Beiersdorf 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 Beiersdorf will offset losses from the drop in Beiersdorf's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Beiersdorf vs. Church Dwight | Beiersdorf vs. LOreal Co ADR | Beiersdorf vs. Unilever PLC | Beiersdorf vs. Estee Lauder Companies |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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