Correlation Between Estee Lauder and HE Equipment
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and HE Equipment 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 HE Equipment 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 HE Equipment Services, you can compare the effects of market volatilities on Estee Lauder and HE Equipment 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 HE Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and HE Equipment.
Diversification Opportunities for Estee Lauder and HE Equipment
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Estee and HEES is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services 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 HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Estee Lauder i.e., Estee Lauder and HE Equipment go up and down completely randomly.
Pair Corralation between Estee Lauder and HE Equipment
Allowing for the 90-day total investment horizon Estee Lauder is expected to generate 2.55 times less return on investment than HE Equipment. But when comparing it to its historical volatility, Estee Lauder Companies is 1.26 times less risky than HE Equipment. It trades about 0.1 of its potential returns per unit of risk. HE Equipment Services is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 5,225 in HE Equipment Services on September 1, 2024 and sell it today you would earn a total of 749.00 from holding HE Equipment Services or generate 14.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. HE Equipment Services
Performance |
| Timeline |
| Estee Lauder Companies |
| HE Equipment Services |
Estee Lauder and HE Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and HE Equipment
The main advantage of trading using opposite Estee Lauder and HE Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, HE Equipment 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 HE Equipment will offset losses from the drop in HE Equipment's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| HE Equipment vs. McGrath RentCorp | HE Equipment vs. Herc Holdings | HE Equipment vs. PROG Holdings | HE Equipment vs. Custom Truck One |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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