Correlation Between Estee Lauder and Kimberly Clark

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

Diversification Opportunities for Estee Lauder and Kimberly Clark

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Estee and Kimberly is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of Estee Lauder i.e., Estee Lauder and Kimberly Clark go up and down completely randomly.

Pair Corralation between Estee Lauder and Kimberly Clark

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Kimberly Clark. In addition to that, Estee Lauder is 2.29 times more volatile than Kimberly Clark. It trades about -0.22 of its total potential returns per unit of risk. Kimberly Clark is currently generating about 0.21 per unit of volatility. If you would invest  12,769  in Kimberly Clark on February 2, 2024 and sell it today you would earn a total of  878.00  from holding Kimberly Clark or generate 6.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Estee Lauder Companies  vs.  Kimberly Clark

 Performance 
       Timeline  
Estee Lauder Companies 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 recent stock price mess, may contribute to short-term losses for the institutional investors.
Kimberly Clark 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Kimberly Clark may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Estee Lauder and Kimberly Clark Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Estee Lauder and Kimberly Clark

The main advantage of trading using opposite Estee Lauder and Kimberly Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder position performs unexpectedly, Kimberly Clark 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 Kimberly Clark will offset losses from the drop in Kimberly Clark's long position.
The idea behind Estee Lauder Companies and Kimberly Clark 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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