Correlation Between Beauty Health and Ontex Group

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

Diversification Opportunities for Beauty Health and Ontex Group

0.34

Correlation Coefficient

Beauty Health  Ontex Group

Weak diversification

The 3 months correlation between Beauty and Ontex is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and Ontex Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ontex Group NV 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 Ontex Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ontex Group NV has no effect on the direction of Beauty Health i.e., Beauty Health and Ontex Group go up and down completely randomly.

Pair Corralation between Beauty Health and Ontex Group

Given the investment horizon of 90 days Beauty Health Co is expected to generate 4.57 times more return on investment than Ontex Group. However, Beauty Health is 4.57 times more volatile than Ontex Group NV. It trades about -0.01 of its potential returns per unit of risk. Ontex Group NV is currently generating about -0.13 per unit of risk. If you would invest  146.00  in Beauty Health Co on December 20, 2024 and sell it today you would lose (14.00) from holding Beauty Health Co or give up 9.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Beauty Health Co  vs.  Ontex Group NV

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 very healthy forward indicators, Beauty Health is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Ontex Group NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ontex Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Beauty Health and Ontex Group

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

The idea behind Beauty Health Co and Ontex Group NV 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.