Correlation Between Sally Beauty and Build A

Can any of the company-specific risk be diversified away by investing in both Sally Beauty and Build A 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 Build A 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 Build A Bear Workshop, you can compare the effects of market volatilities on Sally Beauty and Build A 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 Build A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sally Beauty and Build A.

Diversification Opportunities for Sally Beauty and Build A

-0.72

Correlation Coefficient

Sally Beauty  Build A

Pay attention - limited upside

The 3 months correlation between Sally and Build is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sally Beauty Holdings and Build A Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build A Bear 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 Build A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build A Bear has no effect on the direction of Sally Beauty i.e., Sally Beauty and Build A go up and down completely randomly.

Pair Corralation between Sally Beauty and Build A

Considering the 90-day investment horizon Sally Beauty Holdings is expected to under-perform the Build A. In addition to that, Sally Beauty is 1.73 times more volatile than Build A Bear Workshop. It trades about -0.24 of its total potential returns per unit of risk. Build A Bear Workshop is currently generating about 0.06 per unit of volatility. If you would invest  2,964  in Build A Bear Workshop on February 1, 2024 and sell it today you would earn a total of  52.00  from holding Build A Bear Workshop or generate 1.75% return on investment over 90 days.

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

Sally Beauty Holdings  vs.  Build A Bear Workshop

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.

Build A Bear

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Build A showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sally Beauty and Build A

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

The idea behind Sally Beauty Holdings and Build A Bear Workshop 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.