Correlation Between Big Tree and Herbalife Nutrition

Can any of the company-specific risk be diversified away by investing in both Big Tree and Herbalife Nutrition 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 Big Tree and Herbalife Nutrition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Tree Cloud and Herbalife Nutrition, you can compare the effects of market volatilities on Big Tree and Herbalife Nutrition 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 Big Tree with a short position of Herbalife Nutrition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and Herbalife Nutrition.

Diversification Opportunities for Big Tree and Herbalife Nutrition

-0.4

Correlation Coefficient

Big Tree  Herbalife Nutrition

Very good diversification

The 3 months correlation between Big and Herbalife is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and Herbalife Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herbalife Nutrition and Big Tree 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 Big Tree Cloud are associated (or correlated) with Herbalife Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herbalife Nutrition has no effect on the direction of Big Tree i.e., Big Tree and Herbalife Nutrition go up and down completely randomly.

Pair Corralation between Big Tree and Herbalife Nutrition

Considering the 90-day investment horizon Big Tree Cloud is expected to under-perform the Herbalife Nutrition. In addition to that, Big Tree is 1.52 times more volatile than Herbalife Nutrition. It trades about -0.14 of its total potential returns per unit of risk. Herbalife Nutrition is currently generating about 0.09 per unit of volatility. If you would invest  672.00  in Herbalife Nutrition on December 28, 2024 and sell it today you would earn a total of  190.00  from holding Herbalife Nutrition or generate 28.27% return on investment over 90 days.

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

Big Tree Cloud  vs.  Herbalife Nutrition

Big Tree Cloud

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Tree Cloud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Herbalife Nutrition

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herbalife Nutrition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Herbalife Nutrition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Tree and Herbalife Nutrition

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

The idea behind Big Tree Cloud and Herbalife Nutrition 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.