Correlation Between Sally Beauty and Arko Corp

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

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

Diversification Opportunities for Sally Beauty and Arko Corp

0.33

Correlation Coefficient

Sally Beauty  Arko Corp

Weak diversification

The 3 months correlation between Sally and Arko is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sally Beauty Holdings and Arko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arko Corp and Sally Beauty 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 Sally Beauty Holdings are associated (or correlated) with Arko Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arko Corp has no effect on the direction of Sally Beauty i.e., Sally Beauty and Arko Corp go up and down completely randomly.

Pair Corralation between Sally Beauty and Arko Corp

Considering the 90-day investment horizon Sally Beauty Holdings is expected to under-perform the Arko Corp. In addition to that, Sally Beauty is 1.2 times more volatile than Arko Corp. It trades about -0.01 of its total potential returns per unit of risk. Arko Corp is currently generating about 0.0 per unit of volatility. If you would invest  812.00  in Arko Corp on October 5, 2024 and sell it today you would lose (153.00) from holding Arko Corp or give up 18.84% of portfolio value over 90 days.

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

Sally Beauty Holdings  vs.  Arko Corp

Sally Beauty Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sally Beauty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Arko Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arko Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Arko Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sally Beauty and Arko Corp

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

The idea behind Sally Beauty Holdings and Arko Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.