Correlation Between Origin Materials and Nature Wood
Can any of the company-specific risk be diversified away by investing in both Origin Materials and Nature Wood 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 Origin Materials and Nature Wood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Materials and Nature Wood Group, you can compare the effects of market volatilities on Origin Materials and Nature Wood 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 Origin Materials with a short position of Nature Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Materials and Nature Wood.
Diversification Opportunities for Origin Materials and Nature Wood
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Origin and Nature is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials and Nature Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature Wood Group and Origin Materials 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 Origin Materials are associated (or correlated) with Nature Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature Wood Group has no effect on the direction of Origin Materials i.e., Origin Materials and Nature Wood go up and down completely randomly.
Pair Corralation between Origin Materials and Nature Wood
Given the investment horizon of 90 days Origin Materials is expected to under-perform the Nature Wood. In addition to that, Origin Materials is 1.23 times more volatile than Nature Wood Group. It trades about -0.07 of its total potential returns per unit of risk. Nature Wood Group is currently generating about -0.06 per unit of volatility. If you would invest 147.00 in Nature Wood Group on September 12, 2024 and sell it today you would lose (9.60) from holding Nature Wood Group or give up 6.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Origin Materials vs. Nature Wood Group
Performance |
| Timeline |
| Origin Materials |
| Nature Wood Group |
Origin Materials and Nature Wood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Origin Materials and Nature Wood
The main advantage of trading using opposite Origin Materials and Nature Wood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Materials position performs unexpectedly, Nature Wood 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 Nature Wood will offset losses from the drop in Nature Wood's long position.| Origin Materials vs. Tronox Holdings PLC | Origin Materials vs. Valhi Inc | Origin Materials vs. Lsb Industries | Origin Materials vs. Huntsman |
| Nature Wood vs. Mativ Holdings | Nature Wood vs. Origin Materials | Nature Wood vs. Waste Management | Nature Wood vs. Stepstone Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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