Correlation Between Honest and Beauty Health
Can any of the company-specific risk be diversified away by investing in both Honest and Beauty Health 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 Honest and Beauty Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honest Company and Beauty Health Co, you can compare the effects of market volatilities on Honest and Beauty Health 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 Honest with a short position of Beauty Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honest and Beauty Health.
Diversification Opportunities for Honest and Beauty Health
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Honest and Beauty is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health and Honest 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 Honest Company are associated (or correlated) with Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of Honest i.e., Honest and Beauty Health go up and down completely randomly.
Pair Corralation between Honest and Beauty Health
Given the investment horizon of 90 days Honest Company is expected to generate 0.77 times more return on investment than Beauty Health. However, Honest Company is 1.3 times less risky than Beauty Health. It trades about 0.11 of its potential returns per unit of risk. Beauty Health Co is currently generating about 0.02 per unit of risk. If you would invest 430.00 in Honest Company on November 2, 2024 and sell it today you would earn a total of 198.00 from holding Honest Company or generate 46.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honest Company vs. Beauty Health Co
Performance |
| Timeline |
| Honest Company |
| Beauty Health |
Honest and Beauty Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honest and Beauty Health
The main advantage of trading using opposite Honest and Beauty Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honest position performs unexpectedly, Beauty Health 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 Beauty Health will offset losses from the drop in Beauty Health's long position.| Honest vs. Estee Lauder Companies | Honest vs. Hims Hers Health | Honest vs. Procter Gamble | Honest vs. Coty Inc |
| Beauty Health vs. Clear Secure | Beauty Health vs. GXO Logistics | Beauty Health vs. Doximity | Beauty Health vs. Figs 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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