Correlation Between Beauty Health and PHINIA

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

Diversification Opportunities for Beauty Health and PHINIA

-0.47

Correlation Coefficient

Beauty Health  PHINIA

Very good diversification

The 3 months correlation between Beauty and PHINIA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and PHINIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHINIA Inc 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 PHINIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHINIA Inc has no effect on the direction of Beauty Health i.e., Beauty Health and PHINIA go up and down completely randomly.

Pair Corralation between Beauty Health and PHINIA

Given the investment horizon of 90 days Beauty Health Co is expected to under-perform the PHINIA. In addition to that, Beauty Health is 2.5 times more volatile than PHINIA Inc. It trades about -0.02 of its total potential returns per unit of risk. PHINIA Inc is currently generating about 0.12 per unit of volatility. If you would invest  2,907  in PHINIA Inc on October 24, 2024 and sell it today you would earn a total of  2,241  from holding PHINIA Inc or generate 77.09% return on investment over 90 days.

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

Beauty Health Co  vs.  PHINIA Inc

Beauty Health

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beauty Health Co are ranked lower than 2 (%) 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 February 2025.

PHINIA Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PHINIA Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, PHINIA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beauty Health and PHINIA

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

The idea behind Beauty Health Co and PHINIA Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.