Correlation Between Edgewell Personal and Henkel AG

Can any of the company-specific risk be diversified away by investing in both Edgewell Personal and Henkel AG 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 Edgewell Personal and Henkel AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Edgewell Personal Care and Henkel AG Co, you can compare the effects of market volatilities on Edgewell Personal and Henkel AG 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 Edgewell Personal with a short position of Henkel AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edgewell Personal and Henkel AG.

Diversification Opportunities for Edgewell Personal and Henkel AG

-0.26

Correlation Coefficient

Edgewell Personal  Henkel AG

Very good diversification

The 3 months correlation between Edgewell and Henkel is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Edgewell Personal Care and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG and Edgewell Personal 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 Edgewell Personal Care are associated (or correlated) with Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of Edgewell Personal i.e., Edgewell Personal and Henkel AG go up and down completely randomly.

Pair Corralation between Edgewell Personal and Henkel AG

Considering the 90-day investment horizon Edgewell Personal Care is expected to under-perform the Henkel AG. But the stock apears to be less risky and, when comparing its historical volatility, Edgewell Personal Care is 1.14 times less risky than Henkel AG. The stock trades about -0.07 of its potential returns per unit of risk. The Henkel AG Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,917  in Henkel AG Co on August 31, 2024 and sell it today you would lose (298.00) from holding Henkel AG Co or give up 3.76% of portfolio value over 90 days.

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

Edgewell Personal Care  vs.  Henkel AG Co

Edgewell Personal Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewell Personal Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Henkel AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henkel AG Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Henkel AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Edgewell Personal and Henkel AG

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

The idea behind Edgewell Personal Care and Henkel AG Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.