Correlation Between XL Fleet and Beauty Health

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

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

Diversification Opportunities for XL Fleet and Beauty Health

0.19

Correlation Coefficient

XL Fleet  Beauty Health

Average diversification

The 3 months correlation between XL Fleet and Beauty is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding XL Fleet Corp and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health and XL Fleet 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 XL Fleet Corp 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 XL Fleet i.e., XL Fleet and Beauty Health go up and down completely randomly.

Pair Corralation between XL Fleet and Beauty Health

Allowing for the 90-day total investment horizon XL Fleet Corp is expected to generate 0.68 times more return on investment than Beauty Health. However, XL Fleet Corp is 1.48 times less risky than Beauty Health. It trades about 0.64 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  89.00  in XL Fleet Corp on September 18, 2024 and sell it today you would earn a total of  12.00  from holding XL Fleet Corp or generate 13.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.01%
Values	Daily Returns

XL Fleet Corp  vs.  Beauty Health Co

XL Fleet Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Fleet Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, XL Fleet is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with XL Fleet and Beauty Health

The main advantage of trading using opposite XL Fleet and Beauty Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XL Fleet 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 XL Fleet Corp 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.