Correlation Between Procter Gamble and Estee Lauder
Can any of the company-specific risk be diversified away by investing in both Procter Gamble 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 Procter Gamble and Estee Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Estee Lauder Companies, you can compare the effects of market volatilities on Procter Gamble 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 Procter Gamble with a short position of Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Estee Lauder.
Diversification Opportunities for Procter Gamble and Estee Lauder
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Procter and Estee is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble 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 Procter Gamble 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 Procter Gamble 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 Procter Gamble i.e., Procter Gamble and Estee Lauder go up and down completely randomly.
Pair Corralation between Procter Gamble and Estee Lauder
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 3.03 times less return on investment than Estee Lauder. But when comparing it to its historical volatility, Procter Gamble is 2.86 times less risky than Estee Lauder. It trades about 0.1 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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 Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Procter Gamble vs. Estee Lauder Companies
Performance |
| Timeline |
| Procter Gamble |
| Estee Lauder Companies |
Procter Gamble and Estee Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Estee Lauder
The main advantage of trading using opposite Procter Gamble and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. Reckitt Benckiser Group |
| Estee Lauder vs. Seneca Foods Corp | Estee Lauder vs. Central Garden Pet | Estee Lauder vs. Central Garden Pet | Estee Lauder vs. Associated British Foods |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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