Correlation Between 1 800 and Sally Beauty
Can any of the company-specific risk be diversified away by investing in both 1 800 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 1 800 and Sally Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1 800 FLOWERSCOM and Sally Beauty Holdings, you can compare the effects of market volatilities on 1 800 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 1 800 with a short position of Sally Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1 800 and Sally Beauty.
Diversification Opportunities for 1 800 and Sally Beauty
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FLWS and Sally is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding 1 800 FLOWERSCOM 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 1 800 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 1 800 FLOWERSCOM 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 1 800 i.e., 1 800 and Sally Beauty go up and down completely randomly.
Pair Corralation between 1 800 and Sally Beauty
Given the investment horizon of 90 days 1 800 FLOWERSCOM is expected to generate 1.35 times more return on investment than Sally Beauty. However, 1 800 is 1.35 times more volatile than Sally Beauty Holdings. It trades about 0.2 of its potential returns per unit of risk. Sally Beauty Holdings is currently generating about -0.09 per unit of risk. If you would invest 717.00 in 1 800 FLOWERSCOM on October 20, 2024 and sell it today you would earn a total of 97.00 from holding 1 800 FLOWERSCOM or generate 13.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
1 800 FLOWERSCOM vs. Sally Beauty Holdings
Performance |
| Timeline |
| 1 800 FLOWERSCOM |
| Sally Beauty Holdings |
1 800 and Sally Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 1 800 and Sally Beauty
The main advantage of trading using opposite 1 800 and Sally Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1 800 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 1 800 FLOWERSCOM 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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