Correlation Between Estee Lauder and Krispy Kreme

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

Diversification Opportunities for Estee Lauder and Krispy Kreme

-0.14

Correlation Coefficient

Estee Lauder  Krispy Kreme

Good diversification

The 3 months correlation between Estee and Krispy is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Krispy Kreme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krispy Kreme 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 Krispy Kreme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krispy Kreme has no effect on the direction of Estee Lauder i.e., Estee Lauder and Krispy Kreme go up and down completely randomly.

Pair Corralation between Estee Lauder and Krispy Kreme

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Krispy Kreme. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 3.58 times less risky than Krispy Kreme. The stock trades about -0.02 of its potential returns per unit of risk. The Krispy Kreme is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,201  in Krispy Kreme on January 20, 2024 and sell it today you would earn a total of  176.00  from holding Krispy Kreme or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Estee Lauder Companies  vs.  Krispy Kreme

Estee Lauder Companies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Estee Lauder Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Estee Lauder disclosed solid returns over the last few months and may actually be approaching a breakup point.

Krispy Kreme

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Krispy Kreme are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Krispy Kreme may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Estee Lauder and Krispy Kreme

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

The idea behind Estee Lauder Companies and Krispy Kreme 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.