Correlation Between Estee Lauder and Coty
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Coty 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 Coty 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 Coty Inc, you can compare the effects of market volatilities on Estee Lauder and Coty 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 Coty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Coty.
Diversification Opportunities for Estee Lauder and Coty
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Estee and Coty is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc 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 Coty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coty Inc has no effect on the direction of Estee Lauder i.e., Estee Lauder and Coty go up and down completely randomly.
Pair Corralation between Estee Lauder and Coty
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Coty. In addition to that, Estee Lauder is 2.67 times more volatile than Coty Inc. It trades about -0.18 of its total potential returns per unit of risk. Coty Inc is currently generating about -0.09 per unit of volatility. 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 |
Estee Lauder Companies vs. Coty Inc
Performance |
| Timeline |
| Estee Lauder Companies |
| Coty Inc |
Estee Lauder and Coty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Coty
The main advantage of trading using opposite Estee Lauder and Coty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Coty 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 Coty will offset losses from the drop in Coty's long position.| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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