Correlation Between Agape ATP and ELF Beauty

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

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

Diversification Opportunities for Agape ATP and ELF Beauty

0.61

Correlation Coefficient

Agape ATP  ELF Beauty

Poor diversification

The 3 months correlation between Agape and ELF is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Agape ATP and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty and Agape ATP 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 Agape ATP 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 Agape ATP i.e., Agape ATP and ELF Beauty go up and down completely randomly.

Pair Corralation between Agape ATP and ELF Beauty

Given the investment horizon of 90 days Agape ATP is expected to generate 3.1 times more return on investment than ELF Beauty. However, Agape ATP is 3.1 times more volatile than ELF Beauty. It trades about 0.04 of its potential returns per unit of risk. ELF Beauty is currently generating about -0.23 per unit of risk. If you would invest  115.00  in Agape ATP on December 27, 2024 and sell it today you would lose (12.00) from holding Agape ATP or give up 10.43% of portfolio value over 90 days.

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

Agape ATP  vs.  ELF Beauty

Agape ATP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agape ATP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Agape ATP exhibited solid returns over the last few months and may actually be approaching a breakup point.

ELF Beauty

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELF Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Agape ATP and ELF Beauty

The main advantage of trading using opposite Agape ATP and ELF Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agape ATP 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 Agape ATP 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.