Correlation Between ELF Beauty and Reckitt Benckiser
Can any of the company-specific risk be diversified away by investing in both ELF Beauty and Reckitt Benckiser 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 ELF Beauty and Reckitt Benckiser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELF Beauty and Reckitt Benckiser Group, you can compare the effects of market volatilities on ELF Beauty and Reckitt Benckiser 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 ELF Beauty with a short position of Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELF Beauty and Reckitt Benckiser.
Diversification Opportunities for ELF Beauty and Reckitt Benckiser
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ELF and Reckitt is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ELF Beauty and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser and ELF Beauty 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 ELF Beauty are associated (or correlated) with Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of ELF Beauty i.e., ELF Beauty and Reckitt Benckiser go up and down completely randomly.
Pair Corralation between ELF Beauty and Reckitt Benckiser
Considering the 90-day investment horizon ELF Beauty is expected to generate 1.83 times more return on investment than Reckitt Benckiser. However, ELF Beauty is 1.83 times more volatile than Reckitt Benckiser Group. It trades about 0.12 of its potential returns per unit of risk. Reckitt Benckiser Group is currently generating about -0.05 per unit of risk. If you would invest 10,370 in ELF Beauty on March 14, 2024 and sell it today you would earn a total of 8,588 from holding ELF Beauty or generate 82.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
ELF Beauty vs. Reckitt Benckiser Group
Performance |
Timeline |
ELF Beauty |
Reckitt Benckiser |
ELF Beauty and Reckitt Benckiser Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ELF Beauty and Reckitt Benckiser
The main advantage of trading using opposite ELF Beauty and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELF Beauty position performs unexpectedly, Reckitt Benckiser 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 Reckitt Benckiser will offset losses from the drop in Reckitt Benckiser's long position.ELF Beauty vs. Greystone Logistics | ELF Beauty vs. Aquagold International | ELF Beauty vs. Thrivent High Yield | ELF Beauty vs. Morningstar Unconstrained Allocation |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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