Correlation Between Natural Health and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both Natural Health and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials, you can compare the effects of market volatilities on Natural Health and Vulcan Materials 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 Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Health and Vulcan Materials.
Diversification Opportunities for Natural Health and Vulcan Materials
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Natural and Vulcan is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Natural Health i.e., Natural Health and Vulcan Materials go up and down completely randomly.
Pair Corralation between Natural Health and Vulcan Materials
Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the Vulcan Materials. In addition to that, Natural Health is 2.16 times more volatile than Vulcan Materials. It trades about -0.53 of its total potential returns per unit of risk. Vulcan Materials is currently generating about -0.23 per unit of volatility. If you would invest 26,600 in Vulcan Materials on September 22, 2024 and sell it today you would lose (1,600) from holding Vulcan Materials or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natural Health Trends vs. Vulcan Materials
Performance |
| Timeline |
| Natural Health Trends |
| Vulcan Materials |
Natural Health and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Health and Vulcan Materials
The main advantage of trading using opposite Natural Health and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.| Natural Health vs. Apple Inc | Natural Health vs. Apple Inc | Natural Health vs. Apple Inc | Natural Health vs. Apple Inc |
| Vulcan Materials vs. Check Point Software | Vulcan Materials vs. Natural Health Trends | Vulcan Materials vs. UPDATE SOFTWARE | Vulcan Materials vs. Sabra Health Care |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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