Correlation Between Sappi and ELF Beauty

Can any of the company-specific risk be diversified away by investing in both Sappi and ELF Beauty 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 Sappi and ELF Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sappi Ltd ADR and ELF Beauty, you can compare the effects of market volatilities on Sappi and ELF Beauty 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 Sappi with a short position of ELF Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sappi and ELF Beauty.

Diversification Opportunities for Sappi and ELF Beauty

0.0

Correlation Coefficient

Sappi  ELF Beauty

Pay attention - limited upside

The 3 months correlation between Sappi and ELF is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sappi Ltd ADR and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty and Sappi 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 Sappi Ltd ADR are associated (or correlated) with ELF Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELF Beauty has no effect on the direction of Sappi i.e., Sappi and ELF Beauty go up and down completely randomly.

Pair Corralation between Sappi and ELF Beauty

If you would invest (100.00) in Sappi Ltd ADR on December 27, 2024 and sell it today you would earn a total of  100.00  from holding Sappi Ltd ADR or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Sappi Ltd ADR  vs.  ELF Beauty

Sappi Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sappi Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Sappi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ELF Beauty

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELF Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sappi and ELF Beauty

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

The idea behind Sappi Ltd ADR and ELF Beauty 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.