Correlation Between Shiseido Company and European Wax

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

By analyzing existing cross correlation between Shiseido Company and European Wax Center, you can compare the effects of market volatilities on Shiseido Company and European Wax 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 Shiseido Company with a short position of European Wax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shiseido Company and European Wax.

Diversification Opportunities for Shiseido Company and European Wax

-0.46

Correlation Coefficient

Shiseido Company  European Wax

Very good diversification

The 3 months correlation between Shiseido and European is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shiseido Company and European Wax Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Wax Center and Shiseido Company 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 Shiseido Company are associated (or correlated) with European Wax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Wax Center has no effect on the direction of Shiseido Company i.e., Shiseido Company and European Wax go up and down completely randomly.

Pair Corralation between Shiseido Company and European Wax

Assuming the 90 days horizon Shiseido Company is expected to generate 1.35 times more return on investment than European Wax. However, Shiseido Company is 1.35 times more volatile than European Wax Center. It trades about 0.13 of its potential returns per unit of risk. European Wax Center is currently generating about -0.14 per unit of risk. If you would invest  1,658  in Shiseido Company on December 5, 2024 and sell it today you would earn a total of  163.00  from holding Shiseido Company or generate 9.83% return on investment over 90 days.

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

Shiseido Company  vs.  European Wax Center

Shiseido Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shiseido Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Shiseido Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

European Wax Center

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shiseido Company and European Wax

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

The idea behind Shiseido Company and European Wax Center 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 CEOs Directory module to screen CEOs from public companies around the world.