Correlation Between Bath Body and Conns

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

By analyzing existing cross correlation between Bath Body Works and Conns Inc, you can compare the effects of market volatilities on Bath Body and Conns 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 Bath Body with a short position of Conns. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bath Body and Conns.

Diversification Opportunities for Bath Body and Conns

-0.66

Correlation Coefficient

Bath Body  Conns

Excellent diversification

The 3 months correlation between Bath and Conns is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bath Body Works and Conns Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conns Inc and Bath Body 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 Bath Body Works are associated (or correlated) with Conns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conns Inc has no effect on the direction of Bath Body i.e., Bath Body and Conns go up and down completely randomly.

Pair Corralation between Bath Body and Conns

Given the investment horizon of 90 days Bath Body Works is expected to generate 0.48 times more return on investment than Conns. However, Bath Body Works is 2.09 times less risky than Conns. It trades about 0.05 of its potential returns per unit of risk. Conns Inc is currently generating about 0.01 per unit of risk. If you would invest  3,396  in Bath Body Works on January 20, 2024 and sell it today you would earn a total of  990.00  from holding Bath Body Works or generate 29.15% return on investment over 90 days.

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

Bath Body Works  vs.  Conns Inc

Bath Body Works

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bath Body Works are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Bath Body is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Conns Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conns Inc 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 basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bath Body and Conns

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

The idea behind Bath Body Works and Conns Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.