Correlation Between Estee Lauder and Skechers USA
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Skechers USA 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 Skechers USA 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 Skechers USA, you can compare the effects of market volatilities on Estee Lauder and Skechers USA 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 Skechers USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Skechers USA.
Diversification Opportunities for Estee Lauder and Skechers USA
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Estee and Skechers is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA 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 Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of Estee Lauder i.e., Estee Lauder and Skechers USA go up and down completely randomly.
Pair Corralation between Estee Lauder and Skechers USA
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Skechers USA. In addition to that, Estee Lauder is 3.31 times more volatile than Skechers USA. It trades about -0.15 of its total potential returns per unit of risk. Skechers USA is currently generating about 0.08 per unit of volatility. If you would invest 6,186 in Skechers USA on August 28, 2024 and sell it today you would earn a total of 162.00 from holding Skechers USA or generate 2.62% 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. Skechers USA
Performance |
| Timeline |
| Estee Lauder Companies |
| Skechers USA |
Estee Lauder and Skechers USA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Skechers USA
The main advantage of trading using opposite Estee Lauder and Skechers USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Skechers USA 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 Skechers USA will offset losses from the drop in Skechers USA's long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Kimberly Clark |
| Skechers USA vs. On Holding | Skechers USA vs. Steven Madden | Skechers USA vs. Crocs Inc | Skechers USA vs. Designer Brands |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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