Correlation Between Beauty Community and BEC World

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

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

Diversification Opportunities for Beauty Community and BEC World

0.03

Correlation Coefficient

Beauty Community  BEC World

Significant diversification

The 3 months correlation between Beauty and BEC is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Community Public and BEC World Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEC World Public and Beauty Community 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 Beauty Community Public are associated (or correlated) with BEC World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEC World Public has no effect on the direction of Beauty Community i.e., Beauty Community and BEC World go up and down completely randomly.

Pair Corralation between Beauty Community and BEC World

Assuming the 90 days trading horizon Beauty Community Public is expected to under-perform the BEC World. In addition to that, Beauty Community is 2.87 times more volatile than BEC World Public. It trades about -0.06 of its total potential returns per unit of risk. BEC World Public is currently generating about -0.02 per unit of volatility. If you would invest  384.00  in BEC World Public on December 22, 2024 and sell it today you would lose (8.00) from holding BEC World Public or give up 2.08% of portfolio value over 90 days.

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

Beauty Community Public  vs.  BEC World Public

Beauty Community Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beauty Community Public 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 somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BEC World Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days BEC World Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, BEC World is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Beauty Community and BEC World

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

The idea behind Beauty Community Public and BEC World Public 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.