Correlation Between Weyco and Beauty Health

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

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

Diversification Opportunities for Weyco and Beauty Health

0.11

Correlation Coefficient

Weyco  Beauty Health

Average diversification

The 3 months correlation between Weyco and Beauty is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health and Weyco 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 Weyco Group are associated (or correlated) with Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of Weyco i.e., Weyco and Beauty Health go up and down completely randomly.

Pair Corralation between Weyco and Beauty Health

Given the investment horizon of 90 days Weyco Group is expected to generate 0.36 times more return on investment than Beauty Health. However, Weyco Group is 2.77 times less risky than Beauty Health. It trades about 0.06 of its potential returns per unit of risk. Beauty Health Co is currently generating about -0.02 per unit of risk. If you would invest  2,171  in Weyco Group on September 30, 2024 and sell it today you would earn a total of  1,551  from holding Weyco Group or generate 71.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Weyco Group  vs.  Beauty Health Co

Weyco Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Weyco may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beauty Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beauty Health Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Beauty Health displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weyco and Beauty Health

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

The idea behind Weyco Group and Beauty Health Co 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.