Correlation Between European Wax and Lifevantage

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

Diversification Opportunities for European Wax and Lifevantage

0.44

Correlation Coefficient

European Wax  Lifevantage

Very weak diversification

The 3 months correlation between European and Lifevantage is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage 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 Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of European Wax i.e., European Wax and Lifevantage go up and down completely randomly.

Pair Corralation between European Wax and Lifevantage

Given the investment horizon of 90 days European Wax Center is expected to generate 0.51 times more return on investment than Lifevantage. However, European Wax Center is 1.96 times less risky than Lifevantage. It trades about -0.17 of its potential returns per unit of risk. Lifevantage is currently generating about -0.22 per unit of risk. If you would invest  670.00  in European Wax Center on December 4, 2024 and sell it today you would lose (71.00) from holding European Wax Center or give up 10.6% of portfolio value over 90 days.

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

European Wax Center  vs.  Lifevantage

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 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.

Lifevantage

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Wax and Lifevantage

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

The idea behind European Wax Center and Lifevantage 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.