Correlation Between Estee Lauder and Clorox
Can any of the company-specific risk be diversified away by investing in both Estee Lauder and Clorox 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 Clorox 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 The Clorox, you can compare the effects of market volatilities on Estee Lauder and Clorox 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 Clorox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Clorox.
Diversification Opportunities for Estee Lauder and Clorox
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Estee and Clorox is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and The Clorox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clorox 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 Clorox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clorox has no effect on the direction of Estee Lauder i.e., Estee Lauder and Clorox go up and down completely randomly.
Pair Corralation between Estee Lauder and Clorox
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Clorox. In addition to that, Estee Lauder is 1.59 times more volatile than The Clorox. It trades about -0.03 of its total potential returns per unit of risk. The Clorox is currently generating about 0.01 per unit of volatility. If you would invest 14,124 in The Clorox on January 24, 2024 and sell it today you would earn a total of 390.00 from holding The Clorox or generate 2.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. The Clorox
Performance |
| Timeline |
| Estee Lauder Companies |
| Clorox |
Estee Lauder and Clorox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Clorox
The main advantage of trading using opposite Estee Lauder and Clorox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Clorox 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 Clorox will offset losses from the drop in Clorox's long position.| Estee Lauder vs. Procter Gamble | Estee Lauder vs. Colgate Palmolive | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. European Wax Center |
| Clorox vs. Unilever PLC ADR | Clorox vs. Estee Lauder Companies | Clorox vs. ELF Beauty | Clorox 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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