Correlation Between Alkemy Capital and Bath Body

Can any of the company-specific risk be diversified away by investing in both Alkemy Capital and Bath Body 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 Alkemy Capital and Bath Body into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alkemy Capital Investments and Bath Body Works, you can compare the effects of market volatilities on Alkemy Capital and Bath Body 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 Alkemy Capital with a short position of Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkemy Capital and Bath Body.

Diversification Opportunities for Alkemy Capital and Bath Body

0.69

Correlation Coefficient

Alkemy Capital  Bath Body

Poor diversification

The 3 months correlation between Alkemy and Bath is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Alkemy Capital Investments and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works and Alkemy Capital 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 Alkemy Capital Investments are associated (or correlated) with Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Alkemy Capital i.e., Alkemy Capital and Bath Body go up and down completely randomly.

Pair Corralation between Alkemy Capital and Bath Body

Assuming the 90 days trading horizon Alkemy Capital Investments is expected to generate 4.6 times more return on investment than Bath Body. However, Alkemy Capital is 4.6 times more volatile than Bath Body Works. It trades about 0.17 of its potential returns per unit of risk. Bath Body Works is currently generating about 0.14 per unit of risk. If you would invest  3,950  in Alkemy Capital Investments on September 23, 2024 and sell it today you would earn a total of  9,050  from holding Alkemy Capital Investments or generate 229.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alkemy Capital Investments  vs.  Bath Body Works

Alkemy Capital Inves

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkemy Capital Investments are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Alkemy Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bath Body Works

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bath Body Works are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bath Body unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkemy Capital and Bath Body

The main advantage of trading using opposite Alkemy Capital and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alkemy Capital position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.

The idea behind Alkemy Capital Investments and Bath Body Works 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.