Correlation Between RHI Magnesita and Este Lauder
Can any of the company-specific risk be diversified away by investing in both RHI Magnesita and Este 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 RHI Magnesita and Este Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RHI Magnesita NV and The Este Lauder, you can compare the effects of market volatilities on RHI Magnesita and Este 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 RHI Magnesita with a short position of Este Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of RHI Magnesita and Este Lauder.
Diversification Opportunities for RHI Magnesita and Este Lauder
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RHI and Este is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding RHI Magnesita NV and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder and RHI Magnesita 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 RHI Magnesita NV are associated (or correlated) with Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of RHI Magnesita i.e., RHI Magnesita and Este Lauder go up and down completely randomly.
Pair Corralation between RHI Magnesita and Este Lauder
Assuming the 90 days trading horizon RHI Magnesita is expected to generate 7.41 times less return on investment than Este Lauder. But when comparing it to its historical volatility, RHI Magnesita NV is 1.68 times less risky than Este Lauder. It trades about 0.08 of its potential returns per unit of risk. The Este Lauder is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 6,150 in The Este Lauder on September 18, 2024 and sell it today you would earn a total of 1,430 from holding The Este Lauder or generate 23.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RHI Magnesita NV vs. The Este Lauder
Performance |
| Timeline |
| RHI Magnesita NV |
| Este Lauder |
RHI Magnesita and Este Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RHI Magnesita and Este Lauder
The main advantage of trading using opposite RHI Magnesita and Este Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RHI Magnesita position performs unexpectedly, Este 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 Este Lauder will offset losses from the drop in Este Lauder's long position.| RHI Magnesita vs. AT S Austria | RHI Magnesita vs. Wienerberger AG | RHI Magnesita vs. Lenzing Aktiengesellschaft | RHI Magnesita vs. Voestalpine AG |
| Este Lauder vs. Unilever PLC | Este Lauder vs. RATH Aktiengesellschaft | Este Lauder vs. Semperit Aktiengesellschaft Holding | Este Lauder vs. Telekom Austria AG |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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