Correlation Between China Jo and Sally Beauty

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

By analyzing existing cross correlation between China Jo Jo Drugstores and Sally Beauty Holdings, you can compare the effects of market volatilities on China Jo and Sally Beauty 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 China Jo with a short position of Sally Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Jo and Sally Beauty.

Diversification Opportunities for China Jo and Sally Beauty

0.18

Correlation Coefficient

China Jo  Sally Beauty

Average diversification

The 3 months correlation between China and Sally is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding China Jo Jo Drugstores and Sally Beauty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sally Beauty Holdings and China Jo 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 China Jo Jo Drugstores are associated (or correlated) with Sally Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sally Beauty Holdings has no effect on the direction of China Jo i.e., China Jo and Sally Beauty go up and down completely randomly.

Pair Corralation between China Jo and Sally Beauty

Given the investment horizon of 90 days China Jo Jo Drugstores is expected to under-perform the Sally Beauty. In addition to that, China Jo is 2.81 times more volatile than Sally Beauty Holdings. It trades about -0.03 of its total potential returns per unit of risk. Sally Beauty Holdings is currently generating about 0.01 per unit of volatility. If you would invest  1,250  in Sally Beauty Holdings on September 16, 2024 and sell it today you would lose (3.00) from holding Sally Beauty Holdings or give up 0.24% of portfolio value over 90 days.

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

China Jo Jo Drugstores  vs.  Sally Beauty Holdings

China Jo Jo

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Jo Jo Drugstores are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward-looking indicators, China Jo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sally Beauty Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sally Beauty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Sally Beauty is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with China Jo and Sally Beauty

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

The idea behind China Jo Jo Drugstores and Sally Beauty Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.