Correlation Between ELF Beauty and Central Garden
Can any of the company-specific risk be diversified away by investing in both ELF Beauty and Central Garden 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 ELF Beauty and Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELF Beauty and Central Garden Pet, you can compare the effects of market volatilities on ELF Beauty and Central Garden 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 ELF Beauty with a short position of Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELF Beauty and Central Garden.
Diversification Opportunities for ELF Beauty and Central Garden
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ELF and Central is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ELF Beauty and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet and ELF Beauty 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 ELF Beauty are associated (or correlated) with Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of ELF Beauty i.e., ELF Beauty and Central Garden go up and down completely randomly.
Pair Corralation between ELF Beauty and Central Garden
Considering the 90-day investment horizon ELF Beauty is expected to generate 1.03 times less return on investment than Central Garden. In addition to that, ELF Beauty is 2.84 times more volatile than Central Garden Pet. It trades about 0.14 of its total potential returns per unit of risk. Central Garden Pet is currently generating about 0.4 per unit of volatility. If you would invest 2,976 in Central Garden Pet on August 30, 2024 and sell it today you would earn a total of 437.00 from holding Central Garden Pet or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ELF Beauty vs. Central Garden Pet
Performance |
| Timeline |
| ELF Beauty |
| Central Garden Pet |
ELF Beauty and Central Garden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELF Beauty and Central Garden
The main advantage of trading using opposite ELF Beauty and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELF Beauty position performs unexpectedly, Central Garden 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 Central Garden will offset losses from the drop in Central Garden's long position.| ELF Beauty vs. Procter Gamble | ELF Beauty vs. Colgate Palmolive | ELF Beauty vs. Coty Inc | ELF Beauty vs. Kenvue Inc |
| Central Garden vs. Seneca Foods Corp | Central Garden vs. Central Garden Pet | Central Garden vs. Natures Sunshine Products | Central Garden vs. Associated British Foods |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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