Correlation Between ELF Beauty and Hims Hers

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

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

Diversification Opportunities for ELF Beauty and Hims Hers

-0.5

Correlation Coefficient

ELF Beauty  Hims Hers

Very good diversification

The 3 months correlation between ELF and Hims is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding ELF Beauty and Hims Hers Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hims Hers Health and ELF Beauty 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 ELF Beauty are associated (or correlated) with Hims Hers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hims Hers Health has no effect on the direction of ELF Beauty i.e., ELF Beauty and Hims Hers go up and down completely randomly.

Pair Corralation between ELF Beauty and Hims Hers

Considering the 90-day investment horizon ELF Beauty is expected to under-perform the Hims Hers. But the stock apears to be less risky and, when comparing its historical volatility, ELF Beauty is 1.81 times less risky than Hims Hers. The stock trades about -0.24 of its potential returns per unit of risk. The Hims Hers Health is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,849  in Hims Hers Health on December 26, 2024 and sell it today you would earn a total of  487.00  from holding Hims Hers Health or generate 17.09% return on investment over 90 days.

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

ELF Beauty  vs.  Hims Hers Health

ELF Beauty

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELF Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hims Hers Health

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hims Hers Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Hims Hers unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ELF Beauty and Hims Hers

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

The idea behind ELF Beauty and Hims Hers Health 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.