Correlation Between Estee Lauder and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and NETGEAR 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 NETGEAR 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 NETGEAR, you can compare the effects of market volatilities on Estee Lauder and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and NETGEAR.
Diversification Opportunities for Estee Lauder and NETGEAR
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Estee and NETGEAR is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Estee Lauder i.e., Estee Lauder and NETGEAR go up and down completely randomly.
Pair Corralation between Estee Lauder and NETGEAR
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 1.26 times less risky than NETGEAR. The stock trades about -0.09 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,632 in NETGEAR on September 2, 2024 and sell it today you would earn a total of 828.00 from holding NETGEAR or generate 50.74% 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. NETGEAR
Performance |
| Timeline |
| Estee Lauder Companies |
| NETGEAR |
Estee Lauder and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and NETGEAR
The main advantage of trading using opposite Estee Lauder and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| NETGEAR vs. Comtech Telecommunications Corp | NETGEAR vs. KVH Industries | NETGEAR vs. Silicom | NETGEAR vs. Knowles Cor |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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