Correlation Between Estee Lauder and PT Unilever

Can any of the company-specific risk be diversified away by investing in both Estee Lauder and PT Unilever 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 PT Unilever 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 PT Unilever Indonesia, you can compare the effects of market volatilities on Estee Lauder and PT Unilever 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 PT Unilever. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and PT Unilever.

Diversification Opportunities for Estee Lauder and PT Unilever

0.22

Correlation Coefficient

Estee Lauder  PT Unilever

Modest diversification

The 3 months correlation between Estee and UNLRF is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and PT Unilever Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Unilever Indonesia 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 PT Unilever. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Unilever Indonesia has no effect on the direction of Estee Lauder i.e., Estee Lauder and PT Unilever go up and down completely randomly.

Pair Corralation between Estee Lauder and PT Unilever

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 0.7 times more return on investment than PT Unilever. However, Estee Lauder Companies is 1.44 times less risky than PT Unilever. It trades about -0.03 of its potential returns per unit of risk. PT Unilever Indonesia is currently generating about -0.09 per unit of risk. If you would invest  14,447  in Estee Lauder Companies on February 20, 2024 and sell it today you would lose (972.00) from holding Estee Lauder Companies or give up 6.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Estee Lauder Companies  vs.  PT Unilever Indonesia

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 quite persistent essential indicators, Estee Lauder is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

PT Unilever Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Unilever Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Estee Lauder and PT Unilever

The main advantage of trading using opposite Estee Lauder and PT Unilever positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, PT Unilever 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 PT Unilever will offset losses from the drop in PT Unilever's long position.

The idea behind Estee Lauder Companies and PT Unilever Indonesia 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.