Correlation Between Essity AB and Beiersdorf
Can any of the company-specific risk be diversified away by investing in both Essity AB and Beiersdorf 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 Essity AB and Beiersdorf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essity AB and Beiersdorf AG ADR, you can compare the effects of market volatilities on Essity AB and Beiersdorf 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 Essity AB with a short position of Beiersdorf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essity AB and Beiersdorf.
Diversification Opportunities for Essity AB and Beiersdorf
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Essity and Beiersdorf is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Essity AB and Beiersdorf AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beiersdorf AG ADR and Essity AB 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 Essity AB are associated (or correlated) with Beiersdorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beiersdorf AG ADR has no effect on the direction of Essity AB i.e., Essity AB and Beiersdorf go up and down completely randomly.
Pair Corralation between Essity AB and Beiersdorf
Assuming the 90 days horizon Essity AB is expected to generate 17.23 times more return on investment than Beiersdorf. However, Essity AB is 17.23 times more volatile than Beiersdorf AG ADR. It trades about 0.08 of its potential returns per unit of risk. Beiersdorf AG ADR is currently generating about 0.03 per unit of risk. If you would invest 2,558 in Essity AB on September 3, 2024 and sell it today you would earn a total of 75.00 from holding Essity AB or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 71.92% |
| Values | Daily Returns |
Essity AB vs. Beiersdorf AG ADR
Performance |
| Timeline |
| Essity AB |
| Beiersdorf AG ADR |
Essity AB and Beiersdorf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essity AB and Beiersdorf
The main advantage of trading using opposite Essity AB and Beiersdorf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essity AB position performs unexpectedly, Beiersdorf 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 Beiersdorf will offset losses from the drop in Beiersdorf's long position.| Essity AB vs. LOral SA | Essity AB vs. LOreal Co ADR | Essity AB vs. Unilever PLC ADR | Essity AB vs. Kimberly Clark |
| Beiersdorf vs. Kao Corp ADR | Beiersdorf vs. Henkel AG Co | Beiersdorf vs. Henkel Ag A | Beiersdorf vs. Carlsberg AS |
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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