Correlation Between High-yield Municipal and Estee Lauder

Can any of the company-specific risk be diversified away by investing in both High-yield Municipal 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 High-yield Municipal and Estee Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between High Yield Municipal Fund and Estee Lauder Companies, you can compare the effects of market volatilities on High-yield Municipal 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 High-yield Municipal with a short position of Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Estee Lauder.

Diversification Opportunities for High-yield Municipal and Estee Lauder

-0.37

Correlation Coefficient

High-yield Municipal  Estee Lauder

Very good diversification

The 3 months correlation between High-yield and Estee is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund 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 High-yield Municipal 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 High Yield Municipal Fund 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 High-yield Municipal i.e., High-yield Municipal and Estee Lauder go up and down completely randomly.

Pair Corralation between High-yield Municipal and Estee Lauder

Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.08 times more return on investment than Estee Lauder. However, High Yield Municipal Fund is 13.04 times less risky than Estee Lauder. It trades about 0.23 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.14 per unit of risk. If you would invest  867.00  in High Yield Municipal Fund on March 15, 2024 and sell it today you would earn a total of  18.00  from holding High Yield Municipal Fund or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

High Yield Municipal Fund  vs.  Estee Lauder Companies

High Yield Municipal

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Estee Lauder Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with High-yield Municipal and Estee Lauder

The main advantage of trading using opposite High-yield Municipal and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal 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 High Yield Municipal Fund 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.