Correlation Between Estee Lauder and Newell Brands
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Newell Brands 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 Newell Brands 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 Newell Brands, you can compare the effects of market volatilities on Estee Lauder and Newell Brands 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 Newell Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Newell Brands.
Diversification Opportunities for Estee Lauder and Newell Brands
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Estee and Newell is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 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 Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of Estee Lauder i.e., Estee Lauder and Newell Brands go up and down completely randomly.
Pair Corralation between Estee Lauder and Newell Brands
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 1.06 times more return on investment than Newell Brands. However, Estee Lauder is 1.06 times more volatile than Newell Brands. It trades about 0.11 of its potential returns per unit of risk. Newell Brands is currently generating about -0.08 per unit of risk. If you would invest 13,931 in Estee Lauder Companies on January 26, 2024 and sell it today you would earn a total of 805.00 from holding Estee Lauder Companies or generate 5.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. Newell Brands
Performance |
| Timeline |
| Estee Lauder Companies |
| Newell Brands |
Estee Lauder and Newell Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Newell Brands
The main advantage of trading using opposite Estee Lauder and Newell Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Newell Brands 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 Newell Brands will offset losses from the drop in Newell Brands' long position.| Estee Lauder vs. Colgate Palmolive | Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. European Wax Center |
| Newell Brands vs. The Clorox | Newell Brands vs. Colgate Palmolive | Newell Brands vs. Procter Gamble | Newell Brands vs. Unilever PLC ADR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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