Correlation Between Herbalife Nutrition and Estee Lauder

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

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

Diversification Opportunities for Herbalife Nutrition and Estee Lauder

-0.28

Correlation Coefficient

Herbalife Nutrition  Estee Lauder

Very good diversification

The 3 months correlation between Herbalife and Estee is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Herbalife Nutrition 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 Herbalife Nutrition 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 Herbalife Nutrition 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 Herbalife Nutrition i.e., Herbalife Nutrition and Estee Lauder go up and down completely randomly.

Pair Corralation between Herbalife Nutrition and Estee Lauder

Considering the 90-day investment horizon Herbalife Nutrition is expected to generate 0.92 times more return on investment than Estee Lauder. However, Herbalife Nutrition is 1.08 times less risky than Estee Lauder. It trades about 0.31 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.13 per unit of risk. If you would invest  809.00  in Herbalife Nutrition on February 8, 2024 and sell it today you would earn a total of  197.00  from holding Herbalife Nutrition or generate 24.35% return on investment over 90 days.

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

Herbalife Nutrition  vs.  Estee Lauder Companies

Herbalife Nutrition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Herbalife Nutrition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Herbalife Nutrition and Estee Lauder

The main advantage of trading using opposite Herbalife Nutrition and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herbalife Nutrition 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 Herbalife Nutrition 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..