Correlation Between Henkel AG and Yatsen Holding

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

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

Diversification Opportunities for Henkel AG and Yatsen Holding

-0.66

Correlation Coefficient

Henkel AG  Yatsen Holding

Excellent diversification

The 3 months correlation between Henkel and Yatsen is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Henkel AG Co and Yatsen Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yatsen Holding and Henkel AG 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 Henkel AG Co are associated (or correlated) with Yatsen Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yatsen Holding has no effect on the direction of Henkel AG i.e., Henkel AG and Yatsen Holding go up and down completely randomly.

Pair Corralation between Henkel AG and Yatsen Holding

Assuming the 90 days horizon Henkel AG Co is expected to under-perform the Yatsen Holding. But the pink sheet apears to be less risky and, when comparing its historical volatility, Henkel AG Co is 1.66 times less risky than Yatsen Holding. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Yatsen Holding is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  357.00  in Yatsen Holding on September 16, 2024 and sell it today you would earn a total of  120.00  from holding Yatsen Holding or generate 33.61% return on investment over 90 days.

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

Henkel AG Co  vs.  Yatsen Holding

Henkel AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henkel AG Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Yatsen Holding

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yatsen Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Yatsen Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Henkel AG and Yatsen Holding

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

The idea behind Henkel AG Co and Yatsen Holding 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.