Correlation Between Spectrum Brands and Honest
Can any of the company-specific risk be diversified away by investing in both Spectrum Brands and Honest 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 Spectrum Brands and Honest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spectrum Brands Holdings and Honest Company, you can compare the effects of market volatilities on Spectrum Brands and Honest 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 Spectrum Brands with a short position of Honest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum Brands and Honest.
Diversification Opportunities for Spectrum Brands and Honest
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Spectrum and Honest is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Honest Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honest Company and Spectrum Brands 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 Spectrum Brands Holdings are associated (or correlated) with Honest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honest Company has no effect on the direction of Spectrum Brands i.e., Spectrum Brands and Honest go up and down completely randomly.
Pair Corralation between Spectrum Brands and Honest
Considering the 90-day investment horizon Spectrum Brands Holdings is expected to under-perform the Honest. But the stock apears to be less risky and, when comparing its historical volatility, Spectrum Brands Holdings is 3.42 times less risky than Honest. The stock trades about -0.12 of its potential returns per unit of risk. The Honest Company is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 357.00 in Honest Company on September 30, 2024 and sell it today you would earn a total of 336.00 from holding Honest Company or generate 94.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spectrum Brands Holdings vs. Honest Company
Performance |
| Timeline |
| Spectrum Brands Holdings |
| Honest Company |
Spectrum Brands and Honest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spectrum Brands and Honest
The main advantage of trading using opposite Spectrum Brands and Honest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Brands position performs unexpectedly, Honest 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 Honest will offset losses from the drop in Honest's long position.| Spectrum Brands vs. European Wax Center | Spectrum Brands vs. Inter Parfums | Spectrum Brands vs. Mannatech Incorporated | Spectrum Brands vs. Nu Skin Enterprises |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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