Correlation Between Beauty Health and Virgin Group

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

Diversification Opportunities for Beauty Health and Virgin Group

-0.26

Correlation Coefficient

Beauty Health  Virgin Group

Very good diversification

The 3 months correlation between Beauty and Virgin is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition 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 Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of Beauty Health i.e., Beauty Health and Virgin Group go up and down completely randomly.

Pair Corralation between Beauty Health and Virgin Group

Given the investment horizon of 90 days Beauty Health Co is expected to under-perform the Virgin Group. In addition to that, Beauty Health is 1.06 times more volatile than Virgin Group Acquisition. It trades about -0.05 of its total potential returns per unit of risk. Virgin Group Acquisition is currently generating about 0.0 per unit of volatility. If you would invest  141.00  in Virgin Group Acquisition on December 29, 2024 and sell it today you would lose (7.00) from holding Virgin Group Acquisition or give up 4.96% of portfolio value over 90 days.

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

Beauty Health Co  vs.  Virgin Group Acquisition

Beauty Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beauty Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Virgin Group Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virgin Group Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Virgin Group is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Beauty Health and Virgin Group

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

The idea behind Beauty Health Co and Virgin Group Acquisition 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.