Correlation Between Rite Aid and Sally Beauty

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

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

Diversification Opportunities for Rite Aid and Sally Beauty

0.37

Correlation Coefficient

Rite Aid  Sally Beauty

Weak diversification

The 3 months correlation between Rite and Sally is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Rite Aid 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 Rite Aid 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 Rite Aid 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 Rite Aid i.e., Rite Aid and Sally Beauty go up and down completely randomly.

Pair Corralation between Rite Aid and Sally Beauty

If you would invest  17.00  in Rite Aid on January 20, 2024 and sell it today you would earn a total of  0.00  from holding Rite Aid or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Rite Aid  vs.  Sally Beauty Holdings

Rite Aid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rite Aid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rite Aid is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Rite Aid and Sally Beauty

The main advantage of trading using opposite Rite Aid and Sally Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rite Aid 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 Rite Aid 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.