Correlation Between Sally Beauty and Boomer Holdings

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

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

Diversification Opportunities for Sally Beauty and Boomer Holdings

0.56

Correlation Coefficient

Sally Beauty  Boomer Holdings

Very weak diversification

The 3 months correlation between Sally and Boomer is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sally Beauty Holdings and Boomer Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boomer Holdings and Sally 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 Sally Beauty Holdings are associated (or correlated) with Boomer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boomer Holdings has no effect on the direction of Sally Beauty i.e., Sally Beauty and Boomer Holdings go up and down completely randomly.

Pair Corralation between Sally Beauty and Boomer Holdings

Considering the 90-day investment horizon Sally Beauty Holdings is expected to generate 0.24 times more return on investment than Boomer Holdings. However, Sally Beauty Holdings is 4.22 times less risky than Boomer Holdings. It trades about 0.0 of its potential returns per unit of risk. Boomer Holdings is currently generating about -0.04 per unit of risk. If you would invest  1,289  in Sally Beauty Holdings on February 9, 2024 and sell it today you would lose (207.00) from holding Sally Beauty Holdings or give up 16.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	43.37%
Values	Daily Returns

Sally Beauty Holdings  vs.  Boomer Holdings

Sally Beauty Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sally Beauty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Boomer Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boomer Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Boomer Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sally Beauty and Boomer Holdings

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

The idea behind Sally Beauty Holdings and Boomer Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.