Correlation Between Beauty Health and JBG SMITH

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

Diversification Opportunities for Beauty Health and JBG SMITH

0.01

Correlation Coefficient

Beauty Health  JBG SMITH

Significant diversification

The 3 months correlation between Beauty and JBG is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and JBG SMITH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBG SMITH Properties 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 JBG SMITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBG SMITH Properties has no effect on the direction of Beauty Health i.e., Beauty Health and JBG SMITH go up and down completely randomly.

Pair Corralation between Beauty Health and JBG SMITH

Given the investment horizon of 90 days Beauty Health Co is expected to generate 2.76 times more return on investment than JBG SMITH. However, Beauty Health is 2.76 times more volatile than JBG SMITH Properties. It trades about 0.04 of its potential returns per unit of risk. JBG SMITH Properties is currently generating about -0.1 per unit of risk. If you would invest  149.00  in Beauty Health Co on September 16, 2024 and sell it today you would earn a total of  9.00  from holding Beauty Health Co or generate 6.04% return on investment over 90 days.

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

Beauty Health Co  vs.  JBG SMITH Properties

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.

JBG SMITH Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBG SMITH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Beauty Health and JBG SMITH

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

The idea behind Beauty Health Co and JBG SMITH Properties 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.