Correlation Between Eastern and European Wax

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

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

Diversification Opportunities for Eastern and European Wax

0.41

Correlation Coefficient

Eastern  European Wax

Very weak diversification

The 3 months correlation between Eastern and European is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co 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 Eastern 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 Eastern Co 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 Eastern i.e., Eastern and European Wax go up and down completely randomly.

Pair Corralation between Eastern and European Wax

Considering the 90-day investment horizon Eastern Co is expected to generate 0.62 times more return on investment than European Wax. However, Eastern Co is 1.6 times less risky than European Wax. It trades about 0.01 of its potential returns per unit of risk. European Wax Center is currently generating about -0.17 per unit of risk. If you would invest  2,625  in Eastern Co on December 29, 2024 and sell it today you would lose (20.00) from holding Eastern Co or give up 0.76% of portfolio value over 90 days.

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

Eastern Co  vs.  European Wax Center

Eastern

Risk-Adjusted Performance

Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Eastern is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

European Wax Center

Risk-Adjusted Performance

Very 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 unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eastern and European Wax

The main advantage of trading using opposite Eastern and European Wax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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 Eastern Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.