Correlation Between European Wax and Virgin Group

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

Diversification Opportunities for European Wax and Virgin Group

-0.08

Correlation Coefficient

European Wax  Virgin Group

Good diversification

The 3 months correlation between European and Virgin is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition 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 Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of European Wax i.e., European Wax and Virgin Group go up and down completely randomly.

Pair Corralation between European Wax and Virgin Group

Given the investment horizon of 90 days European Wax Center is expected to under-perform the Virgin Group. But the stock apears to be less risky and, when comparing its historical volatility, European Wax Center is 1.01 times less risky than Virgin Group. The stock trades about -0.09 of its potential returns per unit of risk. The Virgin Group Acquisition is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Virgin Group Acquisition on December 21, 2024 and sell it today you would earn a total of  21.00  from holding Virgin Group Acquisition or generate 15.44% return on investment over 90 days.

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

European Wax Center  vs.  Virgin Group Acquisition

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.

Virgin Group Acquisition

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Wax and Virgin Group

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

The idea behind European Wax Center and Virgin Group Acquisition 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.