Correlation Between Estee Lauder and New Horizon
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and New Horizon 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 New Horizon 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 New Horizon Aircraft, you can compare the effects of market volatilities on Estee Lauder and New Horizon 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 New Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and New Horizon.
Diversification Opportunities for Estee Lauder and New Horizon
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Estee and New is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of Estee Lauder i.e., Estee Lauder and New Horizon go up and down completely randomly.
Pair Corralation between Estee Lauder and New Horizon
Allowing for the 90-day total investment horizon Estee Lauder is expected to generate 2.14 times less return on investment than New Horizon. But when comparing it to its historical volatility, Estee Lauder Companies is 5.94 times less risky than New Horizon. It trades about 0.5 of its potential returns per unit of risk. New Horizon Aircraft is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 52.00 in New Horizon Aircraft on September 15, 2024 and sell it today you would earn a total of 20.00 from holding New Horizon Aircraft or generate 38.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. New Horizon Aircraft
Performance |
| Timeline |
| Estee Lauder Companies |
| New Horizon Aircraft |
Estee Lauder and New Horizon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and New Horizon
The main advantage of trading using opposite Estee Lauder and New Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, New Horizon 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 New Horizon will offset losses from the drop in New Horizon's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| New Horizon vs. Lincoln Electric Holdings | New Horizon vs. Estee Lauder Companies | New Horizon vs. Toro Co | New Horizon vs. Eastern Co |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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