Correlation Between Yatsen Holding and European Wax

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

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

Diversification Opportunities for Yatsen Holding and European Wax

-0.65

Correlation Coefficient

Yatsen Holding  European Wax

Excellent diversification

The 3 months correlation between Yatsen and European is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Yatsen Holding and European Wax Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Wax Center and Yatsen Holding 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 Yatsen Holding are associated (or correlated) with European Wax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Wax Center has no effect on the direction of Yatsen Holding i.e., Yatsen Holding and European Wax go up and down completely randomly.

Pair Corralation between Yatsen Holding and European Wax

Considering the 90-day investment horizon Yatsen Holding is expected to under-perform the European Wax. In addition to that, Yatsen Holding is 3.28 times more volatile than European Wax Center. It trades about -0.2 of its total potential returns per unit of risk. European Wax Center is currently generating about 0.14 per unit of volatility. If you would invest  1,107  in European Wax Center on March 11, 2024 and sell it today you would earn a total of  67.00  from holding European Wax Center or generate 6.05% return on investment over 90 days.

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

Yatsen Holding  vs.  European Wax Center

Yatsen Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yatsen Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Yatsen Holding reported solid returns over the last few months and may actually be approaching a breakup point.

European Wax Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Wax Center 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 fundamental indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Yatsen Holding and European Wax

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

The idea behind Yatsen Holding and European Wax Center 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.