Correlation Between Estee Lauder and Dream Finders
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Dream Finders 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 Dream Finders 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 Dream Finders Homes, you can compare the effects of market volatilities on Estee Lauder and Dream Finders 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 Dream Finders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Dream Finders.
Diversification Opportunities for Estee Lauder and Dream Finders
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Estee and Dream is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Dream Finders Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Finders Homes 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 Dream Finders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Finders Homes has no effect on the direction of Estee Lauder i.e., Estee Lauder and Dream Finders go up and down completely randomly.
Pair Corralation between Estee Lauder and Dream Finders
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 0.69 times more return on investment than Dream Finders. However, Estee Lauder Companies is 1.46 times less risky than Dream Finders. It trades about 0.18 of its potential returns per unit of risk. Dream Finders Homes is currently generating about 0.11 per unit of risk. 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 |
Estee Lauder Companies vs. Dream Finders Homes
Performance |
| Timeline |
| Estee Lauder Companies |
| Dream Finders Homes |
Estee Lauder and Dream Finders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Dream Finders
The main advantage of trading using opposite Estee Lauder and Dream Finders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Dream Finders 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 Dream Finders will offset losses from the drop in Dream Finders' long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Dream Finders vs. TRI Pointe Homes | Dream Finders vs. Beazer Homes USA | Dream Finders vs. Century Communities | Dream Finders vs. Meritage |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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