Correlation Between Marks and Bath Body
Can any of the company-specific risk be diversified away by investing in both Marks and Bath Body 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 Marks and Bath Body into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marks and Spencer and Bath Body Works, you can compare the effects of market volatilities on Marks and Bath Body 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 Marks with a short position of Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marks and Bath Body.
Diversification Opportunities for Marks and Bath Body
Poor diversification
The 3 months correlation between Marks and Bath is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works and Marks 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 Marks and Spencer are associated (or correlated) with Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Marks i.e., Marks and Bath Body go up and down completely randomly.
Pair Corralation between Marks and Bath Body
Assuming the 90 days trading horizon Marks and Spencer is expected to generate 0.48 times more return on investment than Bath Body. However, Marks and Spencer is 2.07 times less risky than Bath Body. It trades about 0.14 of its potential returns per unit of risk. Bath Body Works is currently generating about 0.01 per unit of risk. If you would invest 29,114 in Marks and Spencer on September 24, 2024 and sell it today you would earn a total of 8,826 from holding Marks and Spencer or generate 30.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marks and Spencer vs. Bath Body Works
Performance |
| Timeline |
| Marks and Spencer |
| Bath Body Works |
Marks and Bath Body Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marks and Bath Body
The main advantage of trading using opposite Marks and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marks position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.| Marks vs. Catalyst Media Group | Marks vs. CATLIN GROUP | Marks vs. Tamburi Investment Partners | Marks vs. Magnora ASA |
| Bath Body vs. Uniper SE | Bath Body vs. Mulberry Group PLC | Bath Body vs. London Security Plc | Bath Body vs. Triad Group PLC |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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