Correlation Between Victorias Secret and Sally Beauty

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

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

Diversification Opportunities for Victorias Secret and Sally Beauty

0.83

Correlation Coefficient

Victorias Secret  Sally Beauty

Very poor diversification

The 3 months correlation between Victorias and Sally is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Victorias Secret Co and Sally Beauty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sally Beauty Holdings and Victorias Secret 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 Victorias Secret Co are associated (or correlated) with Sally Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sally Beauty Holdings has no effect on the direction of Victorias Secret i.e., Victorias Secret and Sally Beauty go up and down completely randomly.

Pair Corralation between Victorias Secret and Sally Beauty

Given the investment horizon of 90 days Victorias Secret Co is expected to generate 1.17 times more return on investment than Sally Beauty. However, Victorias Secret is 1.17 times more volatile than Sally Beauty Holdings. It trades about -0.06 of its potential returns per unit of risk. Sally Beauty Holdings is currently generating about -0.24 per unit of risk. If you would invest  1,853  in Victorias Secret Co on February 1, 2024 and sell it today you would lose (91.00) from holding Victorias Secret Co or give up 4.91% of portfolio value over 90 days.

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

Victorias Secret Co  vs.  Sally Beauty Holdings

Victorias Secret

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victorias Secret Co 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 very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 unfluctuating 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.

Pair Trading with Victorias Secret and Sally Beauty

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

The idea behind Victorias Secret Co and Sally Beauty 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.