Correlation Between NYSE Composite and ELF Beauty
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and ELF Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and ELF Beauty, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of ELF Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and ELF Beauty.
Diversification Opportunities for NYSE Composite and ELF Beauty
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and ELF is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and ELF Beauty go up and down completely randomly.
Pair Corralation between NYSE Composite and ELF Beauty
Assuming the 90 days trading horizon NYSE Composite is expected to generate 4.01 times less return on investment than ELF Beauty. But when comparing it to its historical volatility, NYSE Composite is 4.84 times less risky than ELF Beauty. It trades about 0.08 of its potential returns per unit of risk. ELF Beauty is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,481 in ELF Beauty on August 27, 2024 and sell it today you would earn a total of 7,161 from holding ELF Beauty or generate 130.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. ELF Beauty
Performance |
| Timeline |
NYSE Composite and ELF Beauty Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
ELF Beauty
Pair trading matchups for ELF Beauty
Pair Trading with NYSE Composite and ELF Beauty
The main advantage of trading using opposite NYSE Composite and ELF Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| ELF Beauty vs. Procter Gamble | ELF Beauty vs. Colgate Palmolive | 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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