Correlation Between Estee Lauder and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and BBB Foods 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 BBB Foods 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 BBB Foods, you can compare the effects of market volatilities on Estee Lauder and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and BBB Foods.
Diversification Opportunities for Estee Lauder and BBB Foods
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Estee and BBB is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Estee Lauder i.e., Estee Lauder and BBB Foods go up and down completely randomly.
Pair Corralation between Estee Lauder and BBB Foods
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the BBB Foods. In addition to that, Estee Lauder is 1.09 times more volatile than BBB Foods. It trades about -0.12 of its total potential returns per unit of risk. BBB Foods is currently generating about 0.08 per unit of volatility. If you would invest 2,700 in BBB Foods on August 27, 2024 and sell it today you would earn a total of 716.00 from holding BBB Foods or generate 26.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. BBB Foods
Performance |
| Timeline |
| Estee Lauder Companies |
| BBB Foods |
Estee Lauder and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and BBB Foods
The main advantage of trading using opposite Estee Lauder and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Kimberly Clark |
| BBB Foods vs. Kaltura | BBB Foods vs. Analog Devices | BBB Foods vs. Sabra Healthcare REIT | BBB Foods vs. Amkor Technology |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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