Correlation Between Big Tree and Honest
Can any of the company-specific risk be diversified away by investing in both Big Tree and Honest 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 Big Tree and Honest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Tree Cloud and Honest Company, you can compare the effects of market volatilities on Big Tree and Honest 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 Big Tree with a short position of Honest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and Honest.
Diversification Opportunities for Big Tree and Honest
Very good diversification
The 3 months correlation between Big and Honest is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and Honest Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honest Company and Big Tree 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 Big Tree Cloud are associated (or correlated) with Honest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honest Company has no effect on the direction of Big Tree i.e., Big Tree and Honest go up and down completely randomly.
Pair Corralation between Big Tree and Honest
Considering the 90-day investment horizon Big Tree is expected to generate 2.1 times less return on investment than Honest. In addition to that, Big Tree is 2.13 times more volatile than Honest Company. It trades about 0.02 of its total potential returns per unit of risk. Honest Company is currently generating about 0.07 per unit of volatility. If you would invest 282.00 in Honest Company on August 24, 2024 and sell it today you would earn a total of 533.00 from holding Honest Company or generate 189.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.76% |
| Values | Daily Returns |
Big Tree Cloud vs. Honest Company
Performance |
| Timeline |
| Big Tree Cloud |
| Honest Company |
Big Tree and Honest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Tree and Honest
The main advantage of trading using opposite Big Tree and Honest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Tree position performs unexpectedly, Honest 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 Honest will offset losses from the drop in Honest's long position.The idea behind Big Tree Cloud and Honest Company 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.| Honest vs. Estee Lauder Companies | Honest vs. Hims Hers Health | Honest vs. Procter Gamble | Honest vs. Coty Inc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
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| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |