Correlation Between Pool and Estee Lauder
Can any of the company-specific risk be diversified away by investing in both Pool and Estee Lauder 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 Pool and Estee Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and Estee Lauder Companies, you can compare the effects of market volatilities on Pool and Estee Lauder 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 Pool with a short position of Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Estee Lauder.
Diversification Opportunities for Pool and Estee Lauder
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Pool and Estee is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Estee Lauder Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estee Lauder Companies and Pool 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 Pool Corporation are associated (or correlated) with Estee Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estee Lauder Companies has no effect on the direction of Pool i.e., Pool and Estee Lauder go up and down completely randomly.
Pair Corralation between Pool and Estee Lauder
Given the investment horizon of 90 days Pool Corporation is expected to generate 0.75 times more return on investment than Estee Lauder. However, Pool Corporation is 1.34 times less risky than Estee Lauder. It trades about 0.04 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.13 per unit of risk. If you would invest 35,167 in Pool Corporation on September 2, 2024 and sell it today you would earn a total of 2,542 from holding Pool Corporation or generate 7.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. Estee Lauder Companies
Performance |
| Timeline |
| Pool |
| Estee Lauder Companies |
Pool and Estee Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and Estee Lauder
The main advantage of trading using opposite Pool and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Estee Lauder 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 Estee Lauder will offset losses from the drop in Estee Lauder's long position.The idea behind Pool Corporation and Estee Lauder Companies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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