Correlation Between Honest and Stratis

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Can any of the company-specific risk be diversified away by investing in both Honest and Stratis 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 Honest and Stratis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honest Company and Stratis, you can compare the effects of market volatilities on Honest and Stratis 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 Honest with a short position of Stratis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honest and Stratis.

Diversification Opportunities for Honest and Stratis

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Honest and Stratis is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and Stratis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratis and Honest 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 Honest Company are associated (or correlated) with Stratis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratis has no effect on the direction of Honest i.e., Honest and Stratis go up and down completely randomly.

Pair Corralation between Honest and Stratis

Given the investment horizon of 90 days Honest Company is expected to under-perform the Stratis. But the stock apears to be less risky and, when comparing its historical volatility, Honest Company is 1.53 times less risky than Stratis. The stock trades about -0.06 of its potential returns per unit of risk. The Stratis is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Stratis on September 3, 2022 and sell it today you would lose (5.00)  from holding Stratis or give up 9.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy96.92%
ValuesDaily Returns

Honest Company  vs.  Stratis

 Performance (%) 
       Timeline  
Honest Company 
Honest Performance
0 of 100
Over the last 90 days Honest Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2023. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Honest Price Channel

Stratis 
Stratis Performance
0 of 100
Over the last 90 days Stratis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Stratis is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stratis Price Channel

Honest and Stratis Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Honest and Stratis

The main advantage of trading using opposite Honest and Stratis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honest position performs unexpectedly, Stratis 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 Stratis will offset losses from the drop in Stratis' long position.
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The idea behind Honest Company and Stratis 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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Check out your portfolio center. 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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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