Correlation Between Natural Health and HP
Can any of the company-specific risk be diversified away by investing in both Natural Health and HP 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 HP 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 HP Inc, you can compare the effects of market volatilities on Natural Health and HP 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 HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Health and HP.
Diversification Opportunities for Natural Health and HP
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Natural and HP is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP 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 HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Natural Health i.e., Natural Health and HP go up and down completely randomly.
Pair Corralation between Natural Health and HP
Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the HP. But the stock apears to be less risky and, when comparing its historical volatility, Natural Health Trends is 1.02 times less risky than HP. The stock trades about -0.01 of its potential returns per unit of risk. The HP Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 3,335 in HP Inc on September 1, 2024 and sell it today you would lose (35.00) from holding HP Inc or give up 1.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Natural Health Trends vs. HP Inc
Performance |
| Timeline |
| Natural Health Trends |
| HP Inc |
Natural Health and HP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Health and HP
The main advantage of trading using opposite Natural Health and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health position performs unexpectedly, HP 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 HP will offset losses from the drop in HP's long position.| Natural Health vs. Apple Inc | Natural Health vs. Apple Inc | Natural Health vs. Apple Inc | Natural Health vs. Apple Inc |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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