Correlation Between Beauty Health and Designer Brands
Can any of the company-specific risk be diversified away by investing in both Beauty Health and Designer Brands 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 Designer Brands 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 Designer Brands, you can compare the effects of market volatilities on Beauty Health and Designer Brands 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 Designer Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beauty Health and Designer Brands.
Diversification Opportunities for Beauty Health and Designer Brands
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Beauty and Designer is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands 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 Designer Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Designer Brands has no effect on the direction of Beauty Health i.e., Beauty Health and Designer Brands go up and down completely randomly.
Pair Corralation between Beauty Health and Designer Brands
Given the investment horizon of 90 days Beauty Health Co is expected to under-perform the Designer Brands. In addition to that, Beauty Health is 1.46 times more volatile than Designer Brands. It trades about -0.03 of its total potential returns per unit of risk. Designer Brands is currently generating about -0.01 per unit of volatility. If you would invest 960.00 in Designer Brands on November 2, 2024 and sell it today you would lose (455.00) from holding Designer Brands or give up 47.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Beauty Health Co vs. Designer Brands
Performance |
| Timeline |
| Beauty Health |
| Designer Brands |
Beauty Health and Designer Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beauty Health and Designer Brands
The main advantage of trading using opposite Beauty Health and Designer Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beauty Health position performs unexpectedly, Designer Brands 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 Designer Brands will offset losses from the drop in Designer Brands' long position.| Beauty Health vs. Clear Secure | Beauty Health vs. GXO Logistics | Beauty Health vs. Doximity | Beauty Health vs. Figs Inc |
| Designer Brands vs. Wolverine World Wide | Designer Brands vs. Weyco Group | Designer Brands vs. Steven Madden | Designer Brands vs. Rocky Brands |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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