Correlation Between CompoSecure and European Wax

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

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

Diversification Opportunities for CompoSecure and European Wax

-0.53

Correlation Coefficient

CompoSecure  European Wax

Excellent diversification

The 3 months correlation between CompoSecure and European is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure 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 CompoSecure 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 CompoSecure 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 CompoSecure i.e., CompoSecure and European Wax go up and down completely randomly.

Pair Corralation between CompoSecure and European Wax

Assuming the 90 days horizon CompoSecure is expected to under-perform the European Wax. But the stock apears to be less risky and, when comparing its historical volatility, CompoSecure is 1.71 times less risky than European Wax. The stock trades about -0.18 of its potential returns per unit of risk. The European Wax Center is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  583.00  in European Wax Center on October 3, 2024 and sell it today you would earn a total of  84.00  from holding European Wax Center or generate 14.41% return on investment over 90 days.

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

CompoSecure  vs.  European Wax Center

CompoSecure

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CompoSecure showed solid returns over the last few months and may actually be approaching a breakup point.

European Wax Center

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in European Wax Center are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, European Wax may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CompoSecure and European Wax

The main advantage of trading using opposite CompoSecure and European Wax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompoSecure 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 CompoSecure 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..