Correlation Between SentinelOne and Sally Beauty

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

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

Diversification Opportunities for SentinelOne and Sally Beauty

0.86

Correlation Coefficient

SentinelOne  Sally Beauty

Very poor diversification

The 3 months correlation between SentinelOne and Sally is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne 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 SentinelOne 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 SentinelOne 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 SentinelOne i.e., SentinelOne and Sally Beauty go up and down completely randomly.

Pair Corralation between SentinelOne and Sally Beauty

Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the Sally Beauty. But the stock apears to be less risky and, when comparing its historical volatility, SentinelOne is 1.28 times less risky than Sally Beauty. The stock trades about -0.06 of its potential returns per unit of risk. The Sally Beauty Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,136  in Sally Beauty Holdings on January 25, 2024 and sell it today you would lose (26.00) from holding Sally Beauty Holdings or give up 2.29% of portfolio value over 90 days.

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

SentinelOne  vs.  Sally Beauty Holdings

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 fairly strong fundamental drivers, Sally Beauty is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SentinelOne and Sally Beauty

The main advantage of trading using opposite SentinelOne and Sally Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne 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 SentinelOne 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.