Correlation Between El Puerto and Natural Alternatives

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

By analyzing existing cross correlation between El Puerto de and Natural Alternatives International, you can compare the effects of market volatilities on El Puerto and Natural Alternatives 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 El Puerto with a short position of Natural Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Puerto and Natural Alternatives.

Diversification Opportunities for El Puerto and Natural Alternatives

0.61

Correlation Coefficient

El Puerto  Natural Alternatives

Poor diversification

The 3 months correlation between ELPQF and Natural is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding El Puerto de and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives and El Puerto 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 El Puerto de are associated (or correlated) with Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of El Puerto i.e., El Puerto and Natural Alternatives go up and down completely randomly.

Pair Corralation between El Puerto and Natural Alternatives

Assuming the 90 days horizon El Puerto de is expected to under-perform the Natural Alternatives. But the pink sheet apears to be less risky and, when comparing its historical volatility, El Puerto de is 1.36 times less risky than Natural Alternatives. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Natural Alternatives International is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  442.00  in Natural Alternatives International on October 22, 2024 and sell it today you would lose (21.00) from holding Natural Alternatives International or give up 4.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

El Puerto de  vs.  Natural Alternatives Internati

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Natural Alternatives is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with El Puerto and Natural Alternatives

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

The idea behind El Puerto de and Natural Alternatives International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.