Correlation Between European Wax and Mamas Creations

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

By analyzing existing cross correlation between European Wax Center and Mamas Creations, you can compare the effects of market volatilities on European Wax and Mamas Creations 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 European Wax with a short position of Mamas Creations. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Wax and Mamas Creations.

Diversification Opportunities for European Wax and Mamas Creations

0.53

Correlation Coefficient

European Wax  Mamas Creations

Very weak diversification

The 3 months correlation between European and Mamas is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center and Mamas Creations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mamas Creations and European Wax 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 European Wax Center are associated (or correlated) with Mamas Creations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mamas Creations has no effect on the direction of European Wax i.e., European Wax and Mamas Creations go up and down completely randomly.

Pair Corralation between European Wax and Mamas Creations

Given the investment horizon of 90 days European Wax Center is expected to generate 1.79 times more return on investment than Mamas Creations. However, European Wax is 1.79 times more volatile than Mamas Creations. It trades about 0.1 of its potential returns per unit of risk. Mamas Creations is currently generating about 0.16 per unit of risk. If you would invest  345.00  in European Wax Center on May 7, 2025 and sell it today you would earn a total of  85.00  from holding European Wax Center or generate 24.64% return on investment over 90 days.

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

European Wax Center  vs.  Mamas Creations

European Wax Center

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in European Wax Center are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, European Wax showed solid returns over the last few months and may actually be approaching a breakup point.

Mamas Creations

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mamas Creations are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent primary indicators, Mamas Creations sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Wax and Mamas Creations

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

The idea behind European Wax Center and Mamas Creations 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.