Correlation Between Estee Lauder and Big Tree
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Big Tree 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 Big Tree 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 Big Tree Cloud, you can compare the effects of market volatilities on Estee Lauder and Big Tree 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 Big Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Big Tree.
Diversification Opportunities for Estee Lauder and Big Tree
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Estee and Big is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Big Tree Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tree Cloud 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 Big Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tree Cloud has no effect on the direction of Estee Lauder i.e., Estee Lauder and Big Tree go up and down completely randomly.
Pair Corralation between Estee Lauder and Big Tree
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Big Tree. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 5.81 times less risky than Big Tree. The stock trades about -0.13 of its potential returns per unit of risk. The Big Tree Cloud is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,071 in Big Tree Cloud on August 27, 2024 and sell it today you would lose (842.00) from holding Big Tree Cloud or give up 78.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. Big Tree Cloud
Performance |
| Timeline |
| Estee Lauder Companies |
| Big Tree Cloud |
Estee Lauder and Big Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Big Tree
The main advantage of trading using opposite Estee Lauder and Big Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Big Tree 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 Big Tree will offset losses from the drop in Big Tree's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Big Tree vs. Axalta Coating Systems | Big Tree vs. NL Industries | Big Tree vs. Albemarle | Big Tree vs. Sensient Technologies |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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