Correlation Between Estee Lauder and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Morgan Stanley 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 Morgan Stanley 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 Morgan Stanley Direct, you can compare the effects of market volatilities on Estee Lauder and Morgan Stanley 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 Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Morgan Stanley.
Diversification Opportunities for Estee Lauder and Morgan Stanley
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Estee and Morgan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Morgan Stanley Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Direct 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Direct has no effect on the direction of Estee Lauder i.e., Estee Lauder and Morgan Stanley go up and down completely randomly.
Pair Corralation between Estee Lauder and Morgan Stanley
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Morgan Stanley. In addition to that, Estee Lauder is 7.37 times more volatile than Morgan Stanley Direct. It trades about -0.11 of its total potential returns per unit of risk. Morgan Stanley Direct is currently generating about -0.16 per unit of volatility. If you would invest 2,103 in Morgan Stanley Direct on November 28, 2024 and sell it today you would lose (43.00) from holding Morgan Stanley Direct or give up 2.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Estee Lauder Companies vs. Morgan Stanley Direct
Performance |
| Timeline |
| Estee Lauder Companies |
| Morgan Stanley Direct |
Estee Lauder and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Morgan Stanley
The main advantage of trading using opposite Estee Lauder and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Morgan Stanley 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 Morgan Stanley will offset losses from the drop in Morgan Stanley's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Morgan Stanley vs. The Cheesecake Factory | Morgan Stanley vs. Scholastic | Morgan Stanley vs. New Oriental Education | Morgan Stanley vs. Life Time Group |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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