Correlation Between Estee Lauder and United Guardian
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and United Guardian 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 United Guardian 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 United Guardian, you can compare the effects of market volatilities on Estee Lauder and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and United Guardian.
Diversification Opportunities for Estee Lauder and United Guardian
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Estee and United is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Estee Lauder i.e., Estee Lauder and United Guardian go up and down completely randomly.
Pair Corralation between Estee Lauder and United Guardian
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the United Guardian. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 1.14 times less risky than United Guardian. The stock trades about -0.13 of its potential returns per unit of risk. The United Guardian is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 803.00 in United Guardian on August 27, 2024 and sell it today you would earn a total of 172.00 from holding United Guardian or generate 21.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Estee Lauder Companies vs. United Guardian
Performance |
Timeline |
Estee Lauder Companies |
United Guardian |
Estee Lauder and United Guardian Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Estee Lauder and United Guardian
The main advantage of trading using opposite Estee Lauder and United Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, United Guardian 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 United Guardian will offset losses from the drop in United Guardian's long position.Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
United Guardian vs. Utah Medical Products | United Guardian vs. Union Bankshares | United Guardian vs. Psychemedics | United Guardian vs. Unity Bancorp |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Insider Screener Find insiders across different sectors to evaluate their impact on performance |