Correlation Between Beauty Health and Seaport Entertainment

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

Diversification Opportunities for Beauty Health and Seaport Entertainment

-0.15

Correlation Coefficient

Beauty Health  Seaport Entertainment

Good diversification

The 3 months correlation between Beauty and Seaport is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and Seaport Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaport Entertainment 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 Seaport Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaport Entertainment has no effect on the direction of Beauty Health i.e., Beauty Health and Seaport Entertainment go up and down completely randomly.

Pair Corralation between Beauty Health and Seaport Entertainment

Given the investment horizon of 90 days Beauty Health Co is expected to generate 1.08 times more return on investment than Seaport Entertainment. However, Beauty Health is 1.08 times more volatile than Seaport Entertainment Group. It trades about 0.04 of its potential returns per unit of risk. Seaport Entertainment Group is currently generating about -0.01 per unit of risk. If you would invest  149.00  in Beauty Health Co on September 15, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Beauty Health Co  vs.  Seaport Entertainment Group

Beauty Health

Risk-Adjusted Performance

3 of 100

Weak

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 displayed solid returns over the last few months and may actually be approaching a breakup point.

Seaport Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaport Entertainment Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Seaport Entertainment is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Beauty Health and Seaport Entertainment

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

The idea behind Beauty Health Co and Seaport Entertainment Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.