Correlation Between European Wax and Estee Lauder

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

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

Diversification Opportunities for European Wax and Estee Lauder

0.35

Correlation Coefficient

European Wax  Estee Lauder

Weak diversification

The 3 months correlation between European and Estee is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center 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 European Wax 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 European Wax Center 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 European Wax i.e., European Wax and Estee Lauder go up and down completely randomly.

Pair Corralation between European Wax and Estee Lauder

Given the investment horizon of 90 days European Wax is expected to generate 1.67 times less return on investment than Estee Lauder. In addition to that, European Wax is 1.69 times more volatile than Estee Lauder Companies. It trades about 0.1 of its total potential returns per unit of risk. Estee Lauder Companies is currently generating about 0.28 per unit of volatility. If you would invest  5,896  in Estee Lauder Companies on May 7, 2025 and sell it today you would earn a total of  3,354  from holding Estee Lauder Companies or generate 56.89% return on investment over 90 days.

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

European Wax Center  vs.  Estee Lauder Companies

European Wax Center

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in European Wax Center are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, European Wax showed solid returns over the last few months and may actually be approaching a breakup point.

Estee Lauder Companies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Estee Lauder Companies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Estee Lauder disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Wax and Estee Lauder

The main advantage of trading using opposite European Wax and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Wax 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 European Wax Center 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.