Correlation Between European Wax and ELF Beauty
Can any of the company-specific risk be diversified away by investing in both European Wax and ELF 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 European Wax and ELF Beauty 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 ELF Beauty, you can compare the effects of market volatilities on European Wax and ELF 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 European Wax with a short position of ELF Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Wax and ELF Beauty.
Diversification Opportunities for European Wax and ELF Beauty
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between European and ELF is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty 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 ELF Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELF Beauty has no effect on the direction of European Wax i.e., European Wax and ELF Beauty go up and down completely randomly.
Pair Corralation between European Wax and ELF Beauty
Given the investment horizon of 90 days European Wax Center is expected to generate 0.5 times more return on investment than ELF Beauty. However, European Wax Center is 2.01 times less risky than ELF Beauty. It trades about -0.09 of its potential returns per unit of risk. ELF Beauty is currently generating about -0.34 per unit of risk. If you would invest 692.00 in European Wax Center on November 30, 2024 and sell it today you would lose (40.00) from holding European Wax Center or give up 5.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Wax Center vs. ELF Beauty
Performance |
| Timeline |
| European Wax Center |
| ELF Beauty |
European Wax and ELF Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Wax and ELF Beauty
The main advantage of trading using opposite European Wax and ELF Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Wax position performs unexpectedly, ELF 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 ELF Beauty will offset losses from the drop in ELF Beauty's long position.| European Wax vs. Edgewell Personal Care | ||
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| ELF Beauty vs. Procter Gamble | ||
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| ELF Beauty vs. Coty Inc | ||
| ELF Beauty vs. Kenvue 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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