Correlation Between Estee Lauder and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients, you can compare the effects of market volatilities on Estee Lauder and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and MGP Ingredients.
Diversification Opportunities for Estee Lauder and MGP Ingredients
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Estee and MGP is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Estee Lauder i.e., Estee Lauder and MGP Ingredients go up and down completely randomly.
Pair Corralation between Estee Lauder and MGP Ingredients
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the MGP Ingredients. In addition to that, Estee Lauder is 1.07 times more volatile than MGP Ingredients. It trades about -0.08 of its total potential returns per unit of risk. MGP Ingredients is currently generating about -0.06 per unit of volatility. If you would invest 11,596 in MGP Ingredients on August 27, 2024 and sell it today you would lose (7,046) from holding MGP Ingredients or give up 60.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. MGP Ingredients
Performance |
| Timeline |
| Estee Lauder Companies |
| MGP Ingredients |
Estee Lauder and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and MGP Ingredients
The main advantage of trading using opposite Estee Lauder and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Kimberly Clark |
| MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Diageo PLC ADR | MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Constellation Brands Class |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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