Correlation Between VGI Public and Beauty Community

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

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

Diversification Opportunities for VGI Public and Beauty Community

-0.71

Correlation Coefficient

VGI Public  Beauty Community

Pay attention - limited upside

The 3 months correlation between VGI and Beauty is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding VGI Public and Beauty Community Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Community Public and VGI Public 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 VGI Public are associated (or correlated) with Beauty Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Community Public has no effect on the direction of VGI Public i.e., VGI Public and Beauty Community go up and down completely randomly.

Pair Corralation between VGI Public and Beauty Community

Assuming the 90 days trading horizon VGI Public is expected to generate 1.14 times more return on investment than Beauty Community. However, VGI Public is 1.14 times more volatile than Beauty Community Public. It trades about 0.03 of its potential returns per unit of risk. Beauty Community Public is currently generating about -0.08 per unit of risk. If you would invest  320.00  in VGI Public on October 24, 2024 and sell it today you would earn a total of  2.00  from holding VGI Public or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

VGI Public  vs.  Beauty Community Public

VGI Public

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VGI Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, VGI Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Beauty Community Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beauty Community Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with VGI Public and Beauty Community

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

The idea behind VGI Public and Beauty Community Public 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.