Correlation Between Beauty Health and Eltek

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

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

Diversification Opportunities for Beauty Health and Eltek

-0.21

Correlation Coefficient

Beauty Health  Eltek

Very good diversification

The 3 months correlation between Beauty and Eltek is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eltek and Beauty Health 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 Beauty Health Co are associated (or correlated) with Eltek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eltek has no effect on the direction of Beauty Health i.e., Beauty Health and Eltek go up and down completely randomly.

Pair Corralation between Beauty Health and Eltek

Given the investment horizon of 90 days Beauty Health Co is expected to generate 1.0 times more return on investment than Eltek. However, Beauty Health Co is 1.0 times less risky than Eltek. It trades about 0.05 of its potential returns per unit of risk. Eltek is currently generating about -0.01 per unit of risk. If you would invest  157.00  in Beauty Health Co on September 19, 2024 and sell it today you would earn a total of  4.00  from holding Beauty Health Co or generate 2.55% return on investment over 90 days.

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

Beauty Health Co  vs.  Eltek

Beauty Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beauty Health Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward indicators, Beauty Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eltek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eltek has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Eltek is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Beauty Health and Eltek

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

The idea behind Beauty Health Co and Eltek 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.