Correlation Between Estee Lauder and Reynolds Consumer
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Reynolds Consumer 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 Reynolds Consumer 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 Reynolds Consumer Products, you can compare the effects of market volatilities on Estee Lauder and Reynolds Consumer 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 Reynolds Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Reynolds Consumer.
Diversification Opportunities for Estee Lauder and Reynolds Consumer
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Estee and Reynolds is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Reynolds Consumer Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reynolds Consumer 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 Reynolds Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reynolds Consumer has no effect on the direction of Estee Lauder i.e., Estee Lauder and Reynolds Consumer go up and down completely randomly.
Pair Corralation between Estee Lauder and Reynolds Consumer
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Reynolds Consumer. In addition to that, Estee Lauder is 2.41 times more volatile than Reynolds Consumer Products. It trades about -0.07 of its total potential returns per unit of risk. Reynolds Consumer Products is currently generating about 0.04 per unit of volatility. If you would invest 2,541 in Reynolds Consumer Products on August 26, 2024 and sell it today you would earn a total of 235.00 from holding Reynolds Consumer Products or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. Reynolds Consumer Products
Performance |
| Timeline |
| Estee Lauder Companies |
| Reynolds Consumer |
Estee Lauder and Reynolds Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Reynolds Consumer
The main advantage of trading using opposite Estee Lauder and Reynolds Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Reynolds Consumer 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 Reynolds Consumer will offset losses from the drop in Reynolds Consumer's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Reynolds Consumer vs. Greif Bros | Reynolds Consumer vs. Karat Packaging | Reynolds Consumer vs. Silgan Holdings | Reynolds Consumer vs. O I Glass |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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