Correlation Between Estee Lauder and Two Harbors
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Two Harbors 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 Two Harbors 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 Two Harbors Investments, you can compare the effects of market volatilities on Estee Lauder and Two Harbors 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 Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Two Harbors.
Diversification Opportunities for Estee Lauder and Two Harbors
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Estee and Two is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Two Harbors Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investments 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 Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investments has no effect on the direction of Estee Lauder i.e., Estee Lauder and Two Harbors go up and down completely randomly.
Pair Corralation between Estee Lauder and Two Harbors
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 3.96 times more return on investment than Two Harbors. However, Estee Lauder is 3.96 times more volatile than Two Harbors Investments. It trades about 0.38 of its potential returns per unit of risk. Two Harbors Investments is currently generating about -0.05 per unit of risk. If you would invest 7,357 in Estee Lauder Companies on November 5, 2024 and sell it today you would earn a total of 986.00 from holding Estee Lauder Companies or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. Two Harbors Investments
Performance |
| Timeline |
| Estee Lauder Companies |
| Two Harbors Investments |
Estee Lauder and Two Harbors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Two Harbors
The main advantage of trading using opposite Estee Lauder and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Two Harbors 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 Two Harbors will offset losses from the drop in Two Harbors' long position.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
| Two Harbors vs. Ihuman Inc | Two Harbors vs. Definitive Healthcare Corp | Two Harbors vs. ServiceNow | Two Harbors vs. Ryanair Holdings PLC |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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