Correlation Between RH and Leslies
Can any of the company-specific risk be diversified away by investing in both RH and Leslies 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 RH and Leslies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RH and Leslies, you can compare the effects of market volatilities on RH and Leslies 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 RH with a short position of Leslies. Check out your portfolio center. Please also check ongoing floating volatility patterns of RH and Leslies.
Diversification Opportunities for RH and Leslies
Pay attention - limited upside
The 3 months correlation between RH and Leslies is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding RH and Leslies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leslies and RH 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 RH are associated (or correlated) with Leslies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leslies has no effect on the direction of RH i.e., RH and Leslies go up and down completely randomly.
Pair Corralation between RH and Leslies
Allowing for the 90-day total investment horizon RH is expected to generate 1.46 times less return on investment than Leslies. But when comparing it to its historical volatility, RH is 1.05 times less risky than Leslies. It trades about 0.05 of its potential returns per unit of risk. Leslies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 218.00 in Leslies on November 9, 2024 and sell it today you would earn a total of 6.00 from holding Leslies or generate 2.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RH vs. Leslies
Performance |
| Timeline |
| RH |
| Leslies |
RH and Leslies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RH and Leslies
The main advantage of trading using opposite RH and Leslies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RH position performs unexpectedly, Leslies 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 Leslies will offset losses from the drop in Leslies' long position.The idea behind RH and Leslies 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.| Leslies vs. Sally Beauty Holdings | Leslies vs. ODP Corp | Leslies vs. 1 800 FLOWERSCOM | Leslies vs. Caseys General Stores |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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