Correlation Between Build A and Sally Beauty
Can any of the company-specific risk be diversified away by investing in both Build A and Sally Beauty 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 Build A and Sally Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Build A Bear Workshop and Sally Beauty Holdings, you can compare the effects of market volatilities on Build A and Sally Beauty 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 Build A with a short position of Sally Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and Sally Beauty.
Diversification Opportunities for Build A and Sally Beauty
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Build and Sally is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Sally Beauty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sally Beauty Holdings and Build A 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 Build A Bear Workshop are associated (or correlated) with Sally Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sally Beauty Holdings has no effect on the direction of Build A i.e., Build A and Sally Beauty go up and down completely randomly.
Pair Corralation between Build A and Sally Beauty
Considering the 90-day investment horizon Build A is expected to generate 6.37 times less return on investment than Sally Beauty. But when comparing it to its historical volatility, Build A Bear Workshop is 1.43 times less risky than Sally Beauty. It trades about 0.02 of its potential returns per unit of risk. Sally Beauty Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,332 in Sally Beauty Holdings on August 30, 2024 and sell it today you would earn a total of 82.00 from holding Sally Beauty Holdings or generate 6.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Build A Bear Workshop vs. Sally Beauty Holdings
Performance |
| Timeline |
| Build A Bear |
| Sally Beauty Holdings |
Build A and Sally Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Build A and Sally Beauty
The main advantage of trading using opposite Build A and Sally Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A position performs unexpectedly, Sally Beauty 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 Sally Beauty will offset losses from the drop in Sally Beauty's long position.The idea behind Build A Bear Workshop and Sally Beauty Holdings 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.| Sally Beauty vs. Leslies | Sally Beauty vs. National Vision Holdings | Sally Beauty vs. Sportsmans | Sally Beauty vs. MarineMax |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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