Correlation Between Estee Lauder and Beauty Health
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Beauty Health 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 Beauty Health 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 Beauty Health Co, you can compare the effects of market volatilities on Estee Lauder and Beauty Health 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 Beauty Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Beauty Health.
Diversification Opportunities for Estee Lauder and Beauty Health
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Estee and Beauty is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health 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 Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of Estee Lauder i.e., Estee Lauder and Beauty Health go up and down completely randomly.
Pair Corralation between Estee Lauder and Beauty Health
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Beauty Health. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 1.14 times less risky than Beauty Health. The stock trades about -0.18 of its potential returns per unit of risk. The Beauty Health Co is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 167.00 in Beauty Health Co on August 24, 2024 and sell it today you would lose (28.00) from holding Beauty Health Co or give up 16.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. Beauty Health Co
Performance |
| Timeline |
| Estee Lauder Companies |
| Beauty Health |
Estee Lauder and Beauty Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Beauty Health
The main advantage of trading using opposite Estee Lauder and Beauty Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Beauty Health 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 Beauty Health will offset losses from the drop in Beauty Health's long position.| Estee Lauder vs. Eshallgo Class A | Estee Lauder vs. Amtech Systems | Estee Lauder vs. Gold Fields Ltd | Estee Lauder vs. Aegean Airlines SA |
| Beauty Health vs. Clear Secure | Beauty Health vs. GXO Logistics | Beauty Health vs. Doximity | Beauty Health vs. Figs Inc |
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 Stocks Directory module to find actively traded stocks across global markets.
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