Correlation Between D MARKET and Natural Health

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

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

Diversification Opportunities for D MARKET and Natural Health

0.23

Correlation Coefficient

D MARKET  Natural Health

Modest diversification

The 3 months correlation between HEPS and Natural is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding D MARKET Electronic Services 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 D MARKET 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 D MARKET Electronic Services 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 D MARKET i.e., D MARKET and Natural Health go up and down completely randomly.

Pair Corralation between D MARKET and Natural Health

Given the investment horizon of 90 days D MARKET Electronic Services is expected to generate 0.87 times more return on investment than Natural Health. However, D MARKET Electronic Services is 1.15 times less risky than Natural Health. It trades about 0.08 of its potential returns per unit of risk. Natural Health Trend is currently generating about -0.02 per unit of risk. If you would invest  298.00  in D MARKET Electronic Services on December 1, 2024 and sell it today you would earn a total of  34.00  from holding D MARKET Electronic Services or generate 11.41% return on investment over 90 days.

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

D MARKET Electronic Services  vs.  Natural Health Trend

D MARKET Electronic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in D MARKET Electronic Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, D MARKET unveiled solid returns over the last few months and may actually be approaching a breakup point.

Natural Health Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Health Trend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Natural Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with D MARKET and Natural Health

The main advantage of trading using opposite D MARKET and Natural Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if D MARKET 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 D MARKET Electronic Services 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.