Correlation Between Barrick Gold and European Wax

Can any of the company-specific risk be diversified away by investing in both Barrick Gold and European Wax 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 Barrick Gold and European Wax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barrick Gold Corp and European Wax Center, you can compare the effects of market volatilities on Barrick Gold and European Wax 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 Barrick Gold with a short position of European Wax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barrick Gold and European Wax.

Diversification Opportunities for Barrick Gold and European Wax

0.3

Correlation Coefficient

Barrick Gold  European Wax

Weak diversification

The 3 months correlation between Barrick and European is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Barrick Gold Corp and European Wax Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Wax Center and Barrick Gold 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 Barrick Gold Corp are associated (or correlated) with European Wax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Wax Center has no effect on the direction of Barrick Gold i.e., Barrick Gold and European Wax go up and down completely randomly.

Pair Corralation between Barrick Gold and European Wax

Given the investment horizon of 90 days Barrick Gold is expected to generate 2.65 times less return on investment than European Wax. But when comparing it to its historical volatility, Barrick Gold Corp is 1.94 times less risky than European Wax. It trades about 0.04 of its potential returns per unit of risk. European Wax Center is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  601.00  in European Wax Center on November 28, 2024 and sell it today you would earn a total of  49.00  from holding European Wax Center or generate 8.15% return on investment over 90 days.

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

Barrick Gold Corp  vs.  European Wax Center

Barrick Gold Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barrick Gold Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Barrick Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

European Wax Center

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in European Wax Center are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, European Wax showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barrick Gold and European Wax

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

The idea behind Barrick Gold Corp and European Wax Center 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.