Correlation Between Clorox and Beauty Health

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

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

Diversification Opportunities for Clorox and Beauty Health

0.36

Correlation Coefficient

Clorox  Beauty Health

Weak diversification

The 3 months correlation between Clorox and Beauty is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Clorox and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health and Clorox 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 The Clorox are associated (or correlated) with Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of Clorox i.e., Clorox and Beauty Health go up and down completely randomly.

Pair Corralation between Clorox and Beauty Health

Considering the 90-day investment horizon The Clorox is expected to generate 0.35 times more return on investment than Beauty Health. However, The Clorox is 2.82 times less risky than Beauty Health. It trades about -0.08 of its potential returns per unit of risk. Beauty Health Co is currently generating about -0.05 per unit of risk. If you would invest  16,019  in The Clorox on December 28, 2024 and sell it today you would lose (1,391) from holding The Clorox or give up 8.68% of portfolio value over 90 days.

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

The Clorox  vs.  Beauty Health Co

Clorox

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Clorox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Beauty Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beauty Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Clorox and Beauty Health

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

The idea behind The Clorox and Beauty Health Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.