Correlation Between Helen Of and Beauty Health

Can any of the company-specific risk be diversified away by investing in both Helen Of and Beauty Health 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 Helen Of and Beauty Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Helen of Troy and Beauty Health Co, you can compare the effects of market volatilities on Helen Of and Beauty Health 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 Helen Of with a short position of Beauty Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Helen Of and Beauty Health.

Diversification Opportunities for Helen Of and Beauty Health

0.02

Correlation Coefficient

Helen Of  Beauty Health

Significant diversification

The 3 months correlation between Helen and Beauty is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Helen of Troy and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health and Helen Of 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 Helen of Troy are associated (or correlated) with Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of Helen Of i.e., Helen Of and Beauty Health go up and down completely randomly.

Pair Corralation between Helen Of and Beauty Health

Given the investment horizon of 90 days Helen of Troy is expected to generate 0.5 times more return on investment than Beauty Health. However, Helen of Troy is 2.01 times less risky than Beauty Health. It trades about -0.01 of its potential returns per unit of risk. Beauty Health Co is currently generating about -0.02 per unit of risk. If you would invest  10,875  in Helen of Troy on September 14, 2024 and sell it today you would lose (3,956) from holding Helen of Troy or give up 36.38% of portfolio value over 90 days.

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

Helen of Troy  vs.  Beauty Health Co

Helen of Troy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Helen of Troy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Helen Of exhibited solid returns over the last few months and may actually be approaching a breakup point.

Beauty Health

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beauty Health Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward indicators, Beauty Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Helen Of and Beauty Health

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

The idea behind Helen of Troy and Beauty Health 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.