Correlation Between Beauty Health and Spectrum Brands

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

Diversification Opportunities for Beauty Health and Spectrum Brands

-0.02

Correlation Coefficient

Beauty Health  Spectrum Brands

Good diversification

The 3 months correlation between Beauty and Spectrum is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and Spectrum Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Brands Holdings 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 Spectrum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Brands Holdings has no effect on the direction of Beauty Health i.e., Beauty Health and Spectrum Brands go up and down completely randomly.

Pair Corralation between Beauty Health and Spectrum Brands

Given the investment horizon of 90 days Beauty Health Co is expected to generate 3.73 times more return on investment than Spectrum Brands. However, Beauty Health is 3.73 times more volatile than Spectrum Brands Holdings. It trades about 0.3 of its potential returns per unit of risk. Spectrum Brands Holdings is currently generating about -0.57 per unit of risk. If you would invest  150.00  in Beauty Health Co on October 10, 2024 and sell it today you would earn a total of  40.00  from holding Beauty Health Co or generate 26.67% 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.  Spectrum Brands Holdings

Beauty Health

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beauty Health Co are ranked lower than 8 (%) 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.

Spectrum Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spectrum Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beauty Health and Spectrum Brands

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

The idea behind Beauty Health Co and Spectrum Brands Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.