Correlation Between Shiseido and ELF Beauty
Can any of the company-specific risk be diversified away by investing in both Shiseido 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 Shiseido and ELF Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shiseido Company and ELF Beauty, you can compare the effects of market volatilities on Shiseido 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 Shiseido with a short position of ELF Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shiseido and ELF Beauty.
Diversification Opportunities for Shiseido and ELF Beauty
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shiseido and ELF is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shiseido Company and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty and Shiseido 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 Shiseido Company 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 Shiseido i.e., Shiseido and ELF Beauty go up and down completely randomly.
Pair Corralation between Shiseido and ELF Beauty
Assuming the 90 days horizon Shiseido Company is expected to under-perform the ELF Beauty. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shiseido Company is 2.18 times less risky than ELF Beauty. The pink sheet trades about -0.39 of its potential returns per unit of risk. The ELF Beauty is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 10,922 in ELF Beauty on August 31, 2024 and sell it today you would earn a total of 1,793 from holding ELF Beauty or generate 16.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shiseido Company vs. ELF Beauty
Performance |
| Timeline |
| Shiseido |
| ELF Beauty |
Shiseido and ELF Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shiseido and ELF Beauty
The main advantage of trading using opposite Shiseido and ELF Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shiseido 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.| Shiseido vs. Reckitt Benckiser Group | Shiseido vs. Church Dwight | Shiseido vs. Kimberly Clark de Mexico | Shiseido vs. LOreal Co ADR |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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