Correlation Between Global E and Natural Health

Can any of the company-specific risk be diversified away by investing in both Global E and Natural Health 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 Global E and Natural Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global E Online and Natural Health Trend, you can compare the effects of market volatilities on Global E and Natural Health 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 Global E with a short position of Natural Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Natural Health.

Diversification Opportunities for Global E and Natural Health

-0.35

Correlation Coefficient

Global E  Natural Health

Very good diversification

The 3 months correlation between Global and Natural is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Natural Health Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Health Trend and Global E 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 Global E Online are associated (or correlated) with Natural Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Health Trend has no effect on the direction of Global E i.e., Global E and Natural Health go up and down completely randomly.

Pair Corralation between Global E and Natural Health

Given the investment horizon of 90 days Global E Online is expected to under-perform the Natural Health. In addition to that, Global E is 1.88 times more volatile than Natural Health Trend. It trades about -0.09 of its total potential returns per unit of risk. Natural Health Trend is currently generating about 0.27 per unit of volatility. If you would invest  646.00  in Natural Health Trend on February 21, 2024 and sell it today you would earn a total of  57.00  from holding Natural Health Trend or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Global E Online  vs.  Natural Health Trend

Global E Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global E Online has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Natural Health Trend

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Health Trend are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Natural Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global E and Natural Health

The main advantage of trading using opposite Global E and Natural Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E position performs unexpectedly, Natural Health 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 Natural Health will offset losses from the drop in Natural Health's long position.

The idea behind Global E Online and Natural Health Trend pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.