Correlation Between Sally Beauty and Betterware

Can any of the company-specific risk be diversified away by investing in both Sally Beauty and Betterware 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 Betterware 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 Betterware de Mxico,, you can compare the effects of market volatilities on Sally Beauty and Betterware 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 Betterware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sally Beauty and Betterware.

Diversification Opportunities for Sally Beauty and Betterware

0.39

Correlation Coefficient

Sally Beauty  Betterware

Weak diversification

The 3 months correlation between Sally and Betterware is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sally Beauty Holdings and Betterware de Mxico, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betterware de Mxico, 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 Betterware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betterware de Mxico, has no effect on the direction of Sally Beauty i.e., Sally Beauty and Betterware go up and down completely randomly.

Pair Corralation between Sally Beauty and Betterware

Considering the 90-day investment horizon Sally Beauty Holdings is expected to under-perform the Betterware. In addition to that, Sally Beauty is 1.77 times more volatile than Betterware de Mxico,. It trades about -0.15 of its total potential returns per unit of risk. Betterware de Mxico, is currently generating about -0.15 per unit of volatility. If you would invest  1,209  in Betterware de Mxico, on September 15, 2024 and sell it today you would lose (62.00) from holding Betterware de Mxico, or give up 5.13% 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.  Betterware de Mxico,

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 fairly strong fundamental drivers, Sally Beauty is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Betterware de Mxico,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Betterware de Mxico, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sally Beauty and Betterware

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

The idea behind Sally Beauty Holdings and Betterware de Mxico, 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.