Correlation Between European Wax and Ault Alliance

Can any of the company-specific risk be diversified away by investing in both European Wax and Ault Alliance 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 European Wax and Ault Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between European Wax Center and Ault Alliance, you can compare the effects of market volatilities on European Wax and Ault Alliance 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 European Wax with a short position of Ault Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Wax and Ault Alliance.

Diversification Opportunities for European Wax and Ault Alliance

0.31

Correlation Coefficient

European Wax  Ault Alliance

Weak diversification

The 3 months correlation between European and Ault is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center and Ault Alliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ault Alliance and European Wax 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 European Wax Center are associated (or correlated) with Ault Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ault Alliance has no effect on the direction of European Wax i.e., European Wax and Ault Alliance go up and down completely randomly.

Pair Corralation between European Wax and Ault Alliance

Given the investment horizon of 90 days European Wax Center is expected to generate 0.43 times more return on investment than Ault Alliance. However, European Wax Center is 2.34 times less risky than Ault Alliance. It trades about -0.03 of its potential returns per unit of risk. Ault Alliance is currently generating about -0.18 per unit of risk. If you would invest  1,245  in European Wax Center on September 14, 2024 and sell it today you would lose (660.00) from holding European Wax Center or give up 53.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.84%
Values	Daily Returns

European Wax Center  vs.  Ault Alliance

European Wax Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Wax Center has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ault Alliance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ault Alliance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Ault Alliance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with European Wax and Ault Alliance

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

The idea behind European Wax Center and Ault Alliance 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.