Correlation Between Bath Body and Alcon AG

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

By analyzing existing cross correlation between Bath Body Works and Alcon AG, you can compare the effects of market volatilities on Bath Body and Alcon AG 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 Bath Body with a short position of Alcon AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bath Body and Alcon AG.

Diversification Opportunities for Bath Body and Alcon AG

-0.23

Correlation Coefficient

Bath Body  Alcon AG

Very good diversification

The 3 months correlation between Bath and Alcon is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bath Body Works and Alcon AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcon AG and Bath Body 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 Bath Body Works are associated (or correlated) with Alcon AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcon AG has no effect on the direction of Bath Body i.e., Bath Body and Alcon AG go up and down completely randomly.

Pair Corralation between Bath Body and Alcon AG

Given the investment horizon of 90 days Bath Body Works is expected to under-perform the Alcon AG. In addition to that, Bath Body is 2.0 times more volatile than Alcon AG. It trades about -0.08 of its total potential returns per unit of risk. Alcon AG is currently generating about 0.06 per unit of volatility. If you would invest  8,630  in Alcon AG on December 26, 2024 and sell it today you would earn a total of  441.00  from holding Alcon AG or generate 5.11% return on investment over 90 days.

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

Bath Body Works  vs.  Alcon AG

Bath Body Works

Risk-Adjusted Performance

Very Weak

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

Alcon AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alcon AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Alcon AG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bath Body and Alcon AG

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

The idea behind Bath Body Works and Alcon AG 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.