Correlation Between Beauty Health and AMERICAN

Can any of the company-specific risk be diversified away by investing in both Beauty Health and AMERICAN 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 AMERICAN 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 AMERICAN EXPRESS 42, you can compare the effects of market volatilities on Beauty Health and AMERICAN 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 AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beauty Health and AMERICAN.

Diversification Opportunities for Beauty Health and AMERICAN

0.06

Correlation Coefficient

Beauty Health  AMERICAN

Significant diversification

The 3 months correlation between Beauty and AMERICAN is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and AMERICAN EXPRESS 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN EXPRESS 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN EXPRESS has no effect on the direction of Beauty Health i.e., Beauty Health and AMERICAN go up and down completely randomly.

Pair Corralation between Beauty Health and AMERICAN

Given the investment horizon of 90 days Beauty Health Co is expected to generate 18.79 times more return on investment than AMERICAN. However, Beauty Health is 18.79 times more volatile than AMERICAN EXPRESS 42. It trades about 0.03 of its potential returns per unit of risk. AMERICAN EXPRESS 42 is currently generating about -0.11 per unit of risk. If you would invest  150.00  in Beauty Health Co on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Beauty Health Co or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Beauty Health Co  vs.  AMERICAN EXPRESS 42

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 unsteady forward indicators, Beauty Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AMERICAN EXPRESS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMERICAN EXPRESS 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN 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 AMERICAN

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

The idea behind Beauty Health Co and AMERICAN EXPRESS 42 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.