Correlation Between SM Energy and Naturhouse Health
Can any of the company-specific risk be diversified away by investing in both SM Energy and Naturhouse Health 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 SM Energy and Naturhouse Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SM Energy Co and Naturhouse Health SA, you can compare the effects of market volatilities on SM Energy and Naturhouse Health 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 SM Energy with a short position of Naturhouse Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Naturhouse Health.
Diversification Opportunities for SM Energy and Naturhouse Health
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between 0KZA and Naturhouse is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Naturhouse Health SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturhouse Health and SM Energy 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 SM Energy Co are associated (or correlated) with Naturhouse Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturhouse Health has no effect on the direction of SM Energy i.e., SM Energy and Naturhouse Health go up and down completely randomly.
Pair Corralation between SM Energy and Naturhouse Health
Assuming the 90 days trading horizon SM Energy Co is expected to generate 1.8 times more return on investment than Naturhouse Health. However, SM Energy is 1.8 times more volatile than Naturhouse Health SA. It trades about 0.17 of its potential returns per unit of risk. Naturhouse Health SA is currently generating about 0.11 per unit of risk. If you would invest 4,206 in SM Energy Co on September 1, 2024 and sell it today you would earn a total of 303.00 from holding SM Energy Co or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SM Energy Co vs. Naturhouse Health SA
Performance |
| Timeline |
| SM Energy |
| Naturhouse Health |
SM Energy and Naturhouse Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Naturhouse Health
The main advantage of trading using opposite SM Energy and Naturhouse Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Naturhouse Health 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 Naturhouse Health will offset losses from the drop in Naturhouse Health's long position.| SM Energy vs. Zegona Communications Plc | SM Energy vs. FC Investment Trust | SM Energy vs. Liontrust Asset Management | SM Energy vs. Beeks Trading |
| Naturhouse Health vs. Uniper SE | Naturhouse Health vs. Mulberry Group PLC | Naturhouse Health vs. London Security Plc | Naturhouse Health vs. Triad Group PLC |
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 the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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