Correlation Between Natural Health and NOW
Can any of the company-specific risk be diversified away by investing in both Natural Health and NOW 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 Natural Health and NOW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Health Trends and NOW Inc, you can compare the effects of market volatilities on Natural Health and NOW 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 Natural Health with a short position of NOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Health and NOW.
Diversification Opportunities for Natural Health and NOW
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Natural and NOW is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and NOW Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOW Inc and Natural Health 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 Natural Health Trends are associated (or correlated) with NOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOW Inc has no effect on the direction of Natural Health i.e., Natural Health and NOW go up and down completely randomly.
Pair Corralation between Natural Health and NOW
Assuming the 90 days trading horizon Natural Health is expected to generate 2.75 times less return on investment than NOW. But when comparing it to its historical volatility, Natural Health Trends is 1.13 times less risky than NOW. It trades about 0.02 of its potential returns per unit of risk. NOW Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 980.00 in NOW Inc on September 12, 2024 and sell it today you would earn a total of 440.00 from holding NOW Inc or generate 44.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Natural Health Trends vs. NOW Inc
Performance |
| Timeline |
| Natural Health Trends |
| NOW Inc |
Natural Health and NOW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Health and NOW
The main advantage of trading using opposite Natural Health and NOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health position performs unexpectedly, NOW 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 NOW will offset losses from the drop in NOW's long position.| Natural Health vs. Lendlease Group | Natural Health vs. FUYO GENERAL LEASE | Natural Health vs. Ares Management Corp | Natural Health vs. INVITATION HOMES DL |
| NOW vs. AIR PRODCHEMICALS | NOW vs. PennyMac Mortgage Investment | NOW vs. PennantPark Investment | NOW vs. Natural Health Trends |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |