Correlation Between Davis Commodities and Natures Sunshine

Can any of the company-specific risk be diversified away by investing in both Davis Commodities and Natures Sunshine 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 Davis Commodities and Natures Sunshine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davis Commodities Limited and Natures Sunshine Products, you can compare the effects of market volatilities on Davis Commodities and Natures Sunshine 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 Davis Commodities with a short position of Natures Sunshine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Commodities and Natures Sunshine.

Diversification Opportunities for Davis Commodities and Natures Sunshine

0.44

Correlation Coefficient

Davis Commodities  Natures Sunshine

Very weak diversification

The 3 months correlation between Davis and Natures is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited and Natures Sunshine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natures Sunshine Products and Davis Commodities 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 Davis Commodities Limited are associated (or correlated) with Natures Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natures Sunshine Products has no effect on the direction of Davis Commodities i.e., Davis Commodities and Natures Sunshine go up and down completely randomly.

Pair Corralation between Davis Commodities and Natures Sunshine

Given the investment horizon of 90 days Davis Commodities Limited is expected to generate 1.54 times more return on investment than Natures Sunshine. However, Davis Commodities is 1.54 times more volatile than Natures Sunshine Products. It trades about -0.07 of its potential returns per unit of risk. Natures Sunshine Products is currently generating about -0.11 per unit of risk. If you would invest  110.00  in Davis Commodities Limited on December 29, 2024 and sell it today you would lose (17.00) from holding Davis Commodities Limited or give up 15.45% of portfolio value over 90 days.

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

Davis Commodities Limited  vs.  Natures Sunshine Products

Davis Commodities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davis Commodities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Natures Sunshine Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natures Sunshine Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Davis Commodities and Natures Sunshine

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

The idea behind Davis Commodities Limited and Natures Sunshine Products 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 Anywhere module to track or share privately all of your investments from the convenience of any device.