Correlation Between Helen Of and Henkel AG

Can any of the company-specific risk be diversified away by investing in both Helen Of and Henkel AG 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 Helen Of and Henkel AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Helen of Troy and Henkel AG Co, you can compare the effects of market volatilities on Helen Of and Henkel AG 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 Helen Of with a short position of Henkel AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Helen Of and Henkel AG.

Diversification Opportunities for Helen Of and Henkel AG

-0.65

Correlation Coefficient

Helen Of  Henkel AG

Excellent diversification

The 3 months correlation between Helen and Henkel is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Helen of Troy and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG and Helen Of 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 Helen of Troy are associated (or correlated) with Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of Helen Of i.e., Helen Of and Henkel AG go up and down completely randomly.

Pair Corralation between Helen Of and Henkel AG

Given the investment horizon of 90 days Helen of Troy is expected to under-perform the Henkel AG. In addition to that, Helen Of is 1.83 times more volatile than Henkel AG Co. It trades about -0.06 of its total potential returns per unit of risk. Henkel AG Co is currently generating about 0.06 per unit of volatility. If you would invest  7,911  in Henkel AG Co on December 29, 2024 and sell it today you would earn a total of  366.00  from holding Henkel AG Co or generate 4.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Helen of Troy  vs.  Henkel AG Co

Helen of Troy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Helen of Troy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Henkel AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Henkel AG Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, Henkel AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Helen Of and Henkel AG

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

The idea behind Helen of Troy and Henkel AG Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.