Correlation Between Aquagold International and ELF Beauty

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

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

Diversification Opportunities for Aquagold International and ELF Beauty

-0.15

Correlation Coefficient

Aquagold International  ELF Beauty

Good diversification

The 3 months correlation between Aquagold and ELF is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty and Aquagold International 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 Aquagold International are associated (or correlated) with ELF Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELF Beauty has no effect on the direction of Aquagold International i.e., Aquagold International and ELF Beauty go up and down completely randomly.

Pair Corralation between Aquagold International and ELF Beauty

Given the investment horizon of 90 days Aquagold International is expected to under-perform the ELF Beauty. In addition to that, Aquagold International is 7.79 times more volatile than ELF Beauty. It trades about -0.23 of its total potential returns per unit of risk. ELF Beauty is currently generating about -0.19 per unit of volatility. If you would invest  14,046  in ELF Beauty on October 9, 2024 and sell it today you would lose (1,473) from holding ELF Beauty or give up 10.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Aquagold International  vs.  ELF Beauty

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

ELF Beauty

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ELF Beauty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, ELF Beauty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aquagold International and ELF Beauty

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

The idea behind Aquagold International and ELF Beauty 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.