Correlation Between Beauty Health and Clorox
Can any of the company-specific risk be diversified away by investing in both Beauty Health and Clorox 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 Beauty Health and Clorox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beauty Health Co and The Clorox, you can compare the effects of market volatilities on Beauty Health and Clorox 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 Beauty Health with a short position of Clorox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beauty Health and Clorox.
Diversification Opportunities for Beauty Health and Clorox
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Beauty and Clorox is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and The Clorox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clorox and Beauty Health 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 Beauty Health Co are associated (or correlated) with Clorox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clorox has no effect on the direction of Beauty Health i.e., Beauty Health and Clorox go up and down completely randomly.
Pair Corralation between Beauty Health and Clorox
Given the investment horizon of 90 days Beauty Health Co is expected to under-perform the Clorox. In addition to that, Beauty Health is 6.12 times more volatile than The Clorox. It trades about -0.16 of its total potential returns per unit of risk. The Clorox is currently generating about 0.27 per unit of volatility. If you would invest 15,772 in The Clorox on August 28, 2024 and sell it today you would earn a total of 860.00 from holding The Clorox or generate 5.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Beauty Health Co vs. The Clorox
Performance |
| Timeline |
| Beauty Health |
| Clorox |
Beauty Health and Clorox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beauty Health and Clorox
The main advantage of trading using opposite Beauty Health and Clorox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beauty Health position performs unexpectedly, Clorox 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 Clorox will offset losses from the drop in Clorox's long position.| Beauty Health vs. Clear Secure | Beauty Health vs. GXO Logistics | Beauty Health vs. Doximity | Beauty Health vs. Figs Inc |
| Clorox vs. Colgate Palmolive | Clorox vs. Procter Gamble | Clorox vs. Unilever PLC ADR | Clorox vs. Church Dwight |
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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