Correlation Between Estee Lauder and Real Good
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Real Good 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 Real Good 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 Real Good Food, you can compare the effects of market volatilities on Estee Lauder and Real Good 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 Real Good. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Real Good.
Diversification Opportunities for Estee Lauder and Real Good
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Estee and Real is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Real Good Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Good Food 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 Real Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Good Food has no effect on the direction of Estee Lauder i.e., Estee Lauder and Real Good go up and down completely randomly.
Pair Corralation between Estee Lauder and Real Good
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Real Good. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 9.36 times less risky than Real Good. The stock trades about -0.08 of its potential returns per unit of risk. The Real Good Food is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5,160 in Real Good Food on November 9, 2024 and sell it today you would lose (5,146) from holding Real Good Food or give up 99.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.96% |
| Values | Daily Returns |
Estee Lauder Companies vs. Real Good Food
Performance |
| Timeline |
| Estee Lauder Companies |
| Real Good Food |
Risk-Adjusted Performance
Modest
Weak | Strong |
Estee Lauder and Real Good Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Real Good
The main advantage of trading using opposite Estee Lauder and Real Good positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Real Good 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 Real Good will offset losses from the drop in Real Good's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Real Good vs. Seneca Foods Corp | Real Good vs. Central Garden Pet | Real Good vs. Central Garden Pet | Real Good vs. Natures Sunshine Products |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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