Correlation Between Franklin Covey and ELF Beauty

Can any of the company-specific risk be diversified away by investing in both Franklin Covey and ELF Beauty 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 Franklin Covey and ELF Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franklin Covey and ELF Beauty, you can compare the effects of market volatilities on Franklin Covey and ELF Beauty 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 Franklin Covey with a short position of ELF Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Covey and ELF Beauty.

Diversification Opportunities for Franklin Covey and ELF Beauty

0.5

Correlation Coefficient

Franklin Covey  ELF Beauty

Very weak diversification

The 3 months correlation between Franklin and ELF is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Covey and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty and Franklin Covey 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 Franklin Covey are associated (or correlated) with ELF Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELF Beauty has no effect on the direction of Franklin Covey i.e., Franklin Covey and ELF Beauty go up and down completely randomly.

Pair Corralation between Franklin Covey and ELF Beauty

Allowing for the 90-day total investment horizon Franklin Covey is expected to generate 0.54 times more return on investment than ELF Beauty. However, Franklin Covey is 1.84 times less risky than ELF Beauty. It trades about -0.16 of its potential returns per unit of risk. ELF Beauty is currently generating about -0.23 per unit of risk. If you would invest  3,700  in Franklin Covey on December 27, 2024 and sell it today you would lose (803.00) from holding Franklin Covey or give up 21.7% of portfolio value over 90 days.

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

Franklin Covey  vs.  ELF Beauty

Franklin Covey

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Covey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ELF Beauty

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELF Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Franklin Covey and ELF Beauty

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

The idea behind Franklin Covey and ELF Beauty 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.