Correlation Between European Wax and Cracker Barrel

Can any of the company-specific risk be diversified away by investing in both European Wax and Cracker Barrel 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 Cracker Barrel 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 Cracker Barrel Old, you can compare the effects of market volatilities on European Wax and Cracker Barrel 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 Cracker Barrel. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Wax and Cracker Barrel.

Diversification Opportunities for European Wax and Cracker Barrel

-0.52

Correlation Coefficient

European Wax  Cracker Barrel

Excellent diversification

The 3 months correlation between European and Cracker is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center and Cracker Barrel Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cracker Barrel Old 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 Cracker Barrel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cracker Barrel Old has no effect on the direction of European Wax i.e., European Wax and Cracker Barrel go up and down completely randomly.

Pair Corralation between European Wax and Cracker Barrel

Given the investment horizon of 90 days European Wax Center is expected to under-perform the Cracker Barrel. In addition to that, European Wax is 1.32 times more volatile than Cracker Barrel Old. It trades about -0.04 of its total potential returns per unit of risk. Cracker Barrel Old is currently generating about -0.04 per unit of volatility. If you would invest  10,207  in Cracker Barrel Old on October 5, 2024 and sell it today you would lose (4,727) from holding Cracker Barrel Old or give up 46.31% of portfolio value over 90 days.

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

European Wax Center  vs.  Cracker Barrel Old

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 fairly strong fundamental indicators, European Wax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cracker Barrel Old

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cracker Barrel Old are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Wax and Cracker Barrel

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

The idea behind European Wax Center and Cracker Barrel Old 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.