Correlation Between Bt Brands and European Wax

Can any of the company-specific risk be diversified away by investing in both Bt Brands and European Wax 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 Bt Brands and European Wax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bt Brands and European Wax Center, you can compare the effects of market volatilities on Bt Brands and European Wax 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 Bt Brands with a short position of European Wax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bt Brands and European Wax.

Diversification Opportunities for Bt Brands and European Wax

0.48

Correlation Coefficient

Bt Brands  European Wax

Very weak diversification

The 3 months correlation between BTBD and European is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and European Wax Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Wax Center and Bt Brands 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 Bt Brands are associated (or correlated) with European Wax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Wax Center has no effect on the direction of Bt Brands i.e., Bt Brands and European Wax go up and down completely randomly.

Pair Corralation between Bt Brands and European Wax

Given the investment horizon of 90 days Bt Brands is expected to under-perform the European Wax. In addition to that, Bt Brands is 1.02 times more volatile than European Wax Center. It trades about -0.04 of its total potential returns per unit of risk. European Wax Center is currently generating about 0.11 per unit of volatility. If you would invest  610.00  in European Wax Center on October 4, 2024 and sell it today you would earn a total of  57.00  from holding European Wax Center or generate 9.34% return on investment over 90 days.

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

Bt Brands  vs.  European Wax Center

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

European Wax Center

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days European Wax Center has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, European Wax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bt Brands and European Wax

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

The idea behind Bt Brands and European Wax Center 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.