Correlation Between Beauty Community and True Public

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

Diversification Opportunities for Beauty Community and True Public

-0.33

Correlation Coefficient

Beauty Community  True Public

Very good diversification

The 3 months correlation between Beauty and True is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Community Public and True Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True 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 True Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True Public has no effect on the direction of Beauty Community i.e., Beauty Community and True Public go up and down completely randomly.

Pair Corralation between Beauty Community and True Public

Assuming the 90 days trading horizon Beauty Community Public is expected to under-perform the True Public. In addition to that, Beauty Community is 1.67 times more volatile than True Public. It trades about -0.05 of its total potential returns per unit of risk. True Public is currently generating about 0.01 per unit of volatility. If you would invest  1,120  in True Public on December 23, 2024 and sell it today you would lose (10.00) from holding True Public or give up 0.89% of portfolio value over 90 days.

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

Beauty Community Public  vs.  True 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.

True Public

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Beauty Community and True Public

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

The idea behind Beauty Community Public and True 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.