Correlation Between Kao and Hims Hers
Can any of the company-specific risk be diversified away by investing in both Kao and Hims Hers 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 Kao and Hims Hers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kao Corporation and Hims Hers Health, you can compare the effects of market volatilities on Kao and Hims Hers 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 Kao with a short position of Hims Hers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kao and Hims Hers.
Diversification Opportunities for Kao and Hims Hers
Very good diversification
The 3 months correlation between Kao and Hims is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Kao Corp. and Hims Hers Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hims Hers Health and Kao 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 Kao Corporation are associated (or correlated) with Hims Hers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hims Hers Health has no effect on the direction of Kao i.e., Kao and Hims Hers go up and down completely randomly.
Pair Corralation between Kao and Hims Hers
Assuming the 90 days horizon Kao Corporation is expected to under-perform the Hims Hers. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kao Corporation is 2.72 times less risky than Hims Hers. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Hims Hers Health is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,076 in Hims Hers Health on September 3, 2024 and sell it today you would earn a total of 1,146 from holding Hims Hers Health or generate 55.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kao Corp. vs. Hims Hers Health
Performance |
| Timeline |
| Kao Corporation |
| Hims Hers Health |
Kao and Hims Hers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kao and Hims Hers
The main advantage of trading using opposite Kao and Hims Hers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kao position performs unexpectedly, Hims Hers 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 Hims Hers will offset losses from the drop in Hims Hers' long position.The idea behind Kao Corporation and Hims Hers Health 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.| Hims Hers vs. ELF Beauty | Hims Hers vs. Newell Brands | Hims Hers vs. Virgin Group Acquisition | Hims Hers vs. Estee Lauder Companies |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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