Correlation Between European Wax and Bellring Brands

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

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

Diversification Opportunities for European Wax and Bellring Brands

-0.56

Correlation Coefficient

European Wax  Bellring Brands

Excellent diversification

The 3 months correlation between European and Bellring is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center and Bellring Brands LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellring Brands LLC and European Wax 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 European Wax Center are associated (or correlated) with Bellring Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellring Brands LLC has no effect on the direction of European Wax i.e., European Wax and Bellring Brands go up and down completely randomly.

Pair Corralation between European Wax and Bellring Brands

Given the investment horizon of 90 days European Wax Center is expected to under-perform the Bellring Brands. In addition to that, European Wax is 2.43 times more volatile than Bellring Brands LLC. It trades about -0.07 of its total potential returns per unit of risk. Bellring Brands LLC is currently generating about 0.1 per unit of volatility. If you would invest  5,090  in Bellring Brands LLC on September 21, 2024 and sell it today you would earn a total of  2,691  from holding Bellring Brands LLC or generate 52.87% return on investment over 90 days.

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

European Wax Center  vs.  Bellring Brands LLC

European Wax Center

Risk-Adjusted Performance

0 of 100

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bellring Brands LLC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bellring Brands LLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Bellring Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Wax and Bellring Brands

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

The idea behind European Wax Center and Bellring Brands LLC 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.