Correlation Between Kimberly Clark and ELF Beauty

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

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

Diversification Opportunities for Kimberly Clark and ELF Beauty

0.17

Correlation Coefficient

Kimberly Clark  ELF Beauty

Average diversification

The 3 months correlation between Kimberly and ELF is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty and Kimberly Clark 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 Kimberly Clark are associated (or correlated) with ELF Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELF Beauty has no effect on the direction of Kimberly Clark i.e., Kimberly Clark and ELF Beauty go up and down completely randomly.

Pair Corralation between Kimberly Clark and ELF Beauty

Considering the 90-day investment horizon Kimberly Clark is expected to generate 0.27 times more return on investment than ELF Beauty. However, Kimberly Clark is 3.66 times less risky than ELF Beauty. It trades about -0.06 of its potential returns per unit of risk. ELF Beauty is currently generating about -0.08 per unit of risk. If you would invest  13,716  in Kimberly Clark on August 10, 2024 and sell it today you would lose (491.00) from holding Kimberly Clark or give up 3.58% of portfolio value over 90 days.

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

Kimberly Clark  vs.  ELF Beauty

Kimberly Clark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Kimberly Clark is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ELF Beauty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ELF Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Kimberly Clark and ELF Beauty

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

The idea behind Kimberly Clark and ELF Beauty 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.