Correlation Between European Wax and Radcom

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

Diversification Opportunities for European Wax and Radcom

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between European and Radcom is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of European Wax i.e., European Wax and Radcom go up and down completely randomly.

Pair Corralation between European Wax and Radcom

Given the investment horizon of 90 days European Wax Center is expected to under-perform the Radcom. In addition to that, European Wax is 1.16 times more volatile than Radcom. It trades about -0.17 of its total potential returns per unit of risk. Radcom is currently generating about 0.05 per unit of volatility. If you would invest  1,162  in Radcom on September 23, 2024 and sell it today you would earn a total of  27.00  from holding Radcom or generate 2.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

European Wax Center  vs.  Radcom

 Performance 
       Timeline  
European Wax Center 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Radcom 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

European Wax and Radcom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with European Wax and Radcom

The main advantage of trading using opposite European Wax and Radcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Wax position performs unexpectedly, Radcom 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 Radcom will offset losses from the drop in Radcom's long position.
The idea behind European Wax Center and Radcom 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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