Correlation Between Beauty Community and Major Cineplex

Can any of the company-specific risk be diversified away by investing in both Beauty Community and Major Cineplex 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 Major Cineplex 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 Major Cineplex Group, you can compare the effects of market volatilities on Beauty Community and Major Cineplex 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 Major Cineplex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beauty Community and Major Cineplex.

Diversification Opportunities for Beauty Community and Major Cineplex

0.71

Correlation Coefficient

Beauty Community  Major Cineplex

Poor diversification

The 3 months correlation between Beauty and Major is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Community Public and Major Cineplex Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Cineplex Group 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 Major Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Cineplex Group has no effect on the direction of Beauty Community i.e., Beauty Community and Major Cineplex go up and down completely randomly.

Pair Corralation between Beauty Community and Major Cineplex

Assuming the 90 days trading horizon Beauty Community Public is expected to generate 2.33 times more return on investment than Major Cineplex. However, Beauty Community is 2.33 times more volatile than Major Cineplex Group. It trades about -0.07 of its potential returns per unit of risk. Major Cineplex Group is currently generating about -0.26 per unit of risk. If you would invest  31.00  in Beauty Community Public on December 24, 2024 and sell it today you would lose (6.00) from holding Beauty Community Public or give up 19.35% of portfolio value over 90 days.

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

Beauty Community Public  vs.  Major Cineplex Group

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.

Major Cineplex Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Major Cineplex Group 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 fundamental drivers 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.

Pair Trading with Beauty Community and Major Cineplex

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

The idea behind Beauty Community Public and Major Cineplex Group 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.