Correlation Between New Horizon and Natural Alternatives
Can any of the company-specific risk be diversified away by investing in both New Horizon and Natural Alternatives 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 New Horizon and Natural Alternatives into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Horizon Aircraft and Natural Alternatives International, you can compare the effects of market volatilities on New Horizon and Natural Alternatives 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 New Horizon with a short position of Natural Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Horizon and Natural Alternatives.
Diversification Opportunities for New Horizon and Natural Alternatives
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Natural is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding New Horizon Aircraft and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives and New Horizon 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 New Horizon Aircraft are associated (or correlated) with Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of New Horizon i.e., New Horizon and Natural Alternatives go up and down completely randomly.
Pair Corralation between New Horizon and Natural Alternatives
Given the investment horizon of 90 days New Horizon Aircraft is expected to generate 5.95 times more return on investment than Natural Alternatives. However, New Horizon is 5.95 times more volatile than Natural Alternatives International. It trades about 0.38 of its potential returns per unit of risk. Natural Alternatives International is currently generating about 0.02 per unit of risk. If you would invest 28.00 in New Horizon Aircraft on September 5, 2024 and sell it today you would earn a total of 53.00 from holding New Horizon Aircraft or generate 189.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Horizon Aircraft vs. Natural Alternatives Internati
Performance |
| Timeline |
| New Horizon Aircraft |
| Natural Alternatives |
New Horizon and Natural Alternatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Horizon and Natural Alternatives
The main advantage of trading using opposite New Horizon and Natural Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Horizon position performs unexpectedly, Natural Alternatives 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 Natural Alternatives will offset losses from the drop in Natural Alternatives' long position.| New Horizon vs. Natural Alternatives International | New Horizon vs. Weibo Corp | New Horizon vs. Tootsie Roll Industries | New Horizon vs. BCE Inc |
| Natural Alternatives vs. Colgate Palmolive | Natural Alternatives vs. Estee Lauder Companies | Natural Alternatives vs. Procter Gamble | Natural Alternatives vs. United Guardian |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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