Correlation Between Inter Parfums and Honest

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

By analyzing existing cross correlation between Inter Parfums and Honest Company, you can compare the effects of market volatilities on Inter Parfums and Honest 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 Inter Parfums with a short position of Honest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inter Parfums and Honest.

Diversification Opportunities for Inter Parfums and Honest

0.82

Correlation Coefficient

Inter Parfums  Honest

Very poor diversification

The 3 months correlation between Inter and Honest is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Inter Parfums and Honest Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honest Company and Inter Parfums 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 Inter Parfums are associated (or correlated) with Honest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honest Company has no effect on the direction of Inter Parfums i.e., Inter Parfums and Honest go up and down completely randomly.

Pair Corralation between Inter Parfums and Honest

Given the investment horizon of 90 days Inter Parfums is expected to generate 3.63 times less return on investment than Honest. But when comparing it to its historical volatility, Inter Parfums is 2.74 times less risky than Honest. It trades about 0.16 of its potential returns per unit of risk. Honest Company is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Honest Company on September 13, 2024 and sell it today you would earn a total of  303.00  from holding Honest Company or generate 75.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Inter Parfums  vs.  Honest Company

Inter Parfums

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Inter Parfums reported solid returns over the last few months and may actually be approaching a breakup point.

Honest Company

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Honest Company are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Honest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inter Parfums and Honest

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

The idea behind Inter Parfums and Honest Company 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.