Correlation Between Childrens Place and Betterware

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

By analyzing existing cross correlation between Childrens Place and Betterware De Mexico, you can compare the effects of market volatilities on Childrens Place and Betterware 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 Childrens Place with a short position of Betterware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Childrens Place and Betterware.

Diversification Opportunities for Childrens Place and Betterware

-0.65

Correlation Coefficient

Childrens Place  Betterware

Excellent diversification

The 3 months correlation between Childrens and Betterware is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Childrens Place and Betterware De Mexico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betterware De Mexico and Childrens Place 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 Childrens Place are associated (or correlated) with Betterware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betterware De Mexico has no effect on the direction of Childrens Place i.e., Childrens Place and Betterware go up and down completely randomly.

Pair Corralation between Childrens Place and Betterware

Given the investment horizon of 90 days Childrens Place is expected to generate 2.18 times more return on investment than Betterware. However, Childrens Place is 2.18 times more volatile than Betterware De Mexico. It trades about 0.25 of its potential returns per unit of risk. Betterware De Mexico is currently generating about -0.12 per unit of risk. If you would invest  754.00  in Childrens Place on February 22, 2024 and sell it today you would earn a total of  358.00  from holding Childrens Place or generate 47.48% return on investment over 90 days.

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

Childrens Place  vs.  Betterware De Mexico

Childrens Place

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Childrens Place has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Betterware De Mexico

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Betterware De Mexico are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Betterware showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Childrens Place and Betterware

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

The idea behind Childrens Place and Betterware De Mexico 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.