Correlation Between Estee Lauder and Rectitude Holdings
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Rectitude Holdings 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 Rectitude Holdings 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 Rectitude Holdings Ltd, you can compare the effects of market volatilities on Estee Lauder and Rectitude Holdings 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 Rectitude Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Rectitude Holdings.
Diversification Opportunities for Estee Lauder and Rectitude Holdings
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Estee and Rectitude is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Rectitude Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rectitude Holdings 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 Rectitude Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rectitude Holdings has no effect on the direction of Estee Lauder i.e., Estee Lauder and Rectitude Holdings go up and down completely randomly.
Pair Corralation between Estee Lauder and Rectitude Holdings
Allowing for the 90-day total investment horizon Estee Lauder is expected to generate 7.06 times less return on investment than Rectitude Holdings. But when comparing it to its historical volatility, Estee Lauder Companies is 1.64 times less risky than Rectitude Holdings. It trades about 0.1 of its potential returns per unit of risk. Rectitude Holdings Ltd is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 320.00 in Rectitude Holdings Ltd on September 1, 2024 and sell it today you would earn a total of 148.00 from holding Rectitude Holdings Ltd or generate 46.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. Rectitude Holdings Ltd
Performance |
| Timeline |
| Estee Lauder Companies |
| Rectitude Holdings |
Estee Lauder and Rectitude Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Rectitude Holdings
The main advantage of trading using opposite Estee Lauder and Rectitude Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Rectitude Holdings 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 Rectitude Holdings will offset losses from the drop in Rectitude Holdings' long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Rectitude Holdings vs. Skechers USA | Rectitude Holdings vs. Rocky Brands | Rectitude Holdings vs. Smith Douglas Homes | Rectitude Holdings vs. Estee Lauder Companies |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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