Correlation Between CenterPoint Energy and Estee Lauder

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

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

Diversification Opportunities for CenterPoint Energy and Estee Lauder

0.49

Correlation Coefficient

CenterPoint Energy  Estee Lauder

Very weak diversification

The 3 months correlation between CenterPoint and Estee is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy i.e., CenterPoint Energy and Estee Lauder go up and down completely randomly.

Pair Corralation between CenterPoint Energy and Estee Lauder

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 0.55 times more return on investment than Estee Lauder. However, CenterPoint Energy is 1.83 times less risky than Estee Lauder. It trades about 0.06 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.09 per unit of risk. If you would invest  2,849  in CenterPoint Energy on January 28, 2024 and sell it today you would earn a total of  36.00  from holding CenterPoint Energy or generate 1.26% return on investment over 90 days.

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

CenterPoint Energy  vs.  Estee Lauder Companies

CenterPoint Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, CenterPoint Energy is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Estee Lauder Companies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Estee Lauder Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Estee Lauder may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with CenterPoint Energy and Estee Lauder

The main advantage of trading using opposite CenterPoint Energy and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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 CenterPoint Energy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.