Correlation Between Natural Health and Big 5
Can any of the company-specific risk be diversified away by investing in both Natural Health and Big 5 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 Big 5 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 Big 5 Sporting, you can compare the effects of market volatilities on Natural Health and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Health and Big 5.
Diversification Opportunities for Natural Health and Big 5
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Natural and Big is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Natural Health i.e., Natural Health and Big 5 go up and down completely randomly.
Pair Corralation between Natural Health and Big 5
Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the Big 5. But the stock apears to be less risky and, when comparing its historical volatility, Natural Health Trends is 1.16 times less risky than Big 5. The stock trades about -0.01 of its potential returns per unit of risk. The Big 5 Sporting is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 152.00 in Big 5 Sporting on September 5, 2024 and sell it today you would earn a total of 7.00 from holding Big 5 Sporting or generate 4.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Natural Health Trends vs. Big 5 Sporting
Performance |
| Timeline |
| Natural Health Trends |
| Big 5 Sporting |
Natural Health and Big 5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Health and Big 5
The main advantage of trading using opposite Natural Health and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.| Natural Health vs. ANGLER GAMING PLC | Natural Health vs. Hochschild Mining plc | Natural Health vs. HOCHSCHILD MINING | Natural Health vs. OURGAME INTHOLDL 00005 |
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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