Correlation Between European Wax and Cadre Holdings

Can any of the company-specific risk be diversified away by investing in both European Wax and Cadre Holdings 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 Cadre Holdings 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 Cadre Holdings, you can compare the effects of market volatilities on European Wax and Cadre Holdings 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 Cadre Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Wax and Cadre Holdings.

Diversification Opportunities for European Wax and Cadre Holdings

0.31

Correlation Coefficient

European Wax  Cadre Holdings

Weak diversification

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

Pair Corralation between European Wax and Cadre Holdings

Given the investment horizon of 90 days European Wax Center is expected to under-perform the Cadre Holdings. In addition to that, European Wax is 1.94 times more volatile than Cadre Holdings. It trades about -0.03 of its total potential returns per unit of risk. Cadre Holdings is currently generating about -0.02 per unit of volatility. If you would invest  3,475  in Cadre Holdings on September 2, 2024 and sell it today you would lose (136.00) from holding Cadre Holdings or give up 3.91% of portfolio value over 90 days.

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

European Wax Center  vs.  Cadre Holdings

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 latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cadre Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cadre Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cadre Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with European Wax and Cadre Holdings

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

The idea behind European Wax Center and Cadre Holdings 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.