Correlation Between Imaflex and Good Natured

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

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

Diversification Opportunities for Imaflex and Good Natured

0.6

Correlation Coefficient

Imaflex  Good Natured

Poor diversification

The 3 months correlation between Imaflex and Good is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Imaflex and Good Natured Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Natured Products and Imaflex 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 Imaflex are associated (or correlated) with Good Natured. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Natured Products has no effect on the direction of Imaflex i.e., Imaflex and Good Natured go up and down completely randomly.

Pair Corralation between Imaflex and Good Natured

Assuming the 90 days horizon Imaflex is expected to under-perform the Good Natured. But the pink sheet apears to be less risky and, when comparing its historical volatility, Imaflex is 1.04 times less risky than Good Natured. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Good Natured Products is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Good Natured Products on October 22, 2024 and sell it today you would earn a total of  0.04  from holding Good Natured Products or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	40.63%
Values	Daily Returns

Imaflex  vs.  Good Natured Products

Imaflex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imaflex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Good Natured Products

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Good Natured Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Good Natured reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imaflex and Good Natured

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

The idea behind Imaflex and Good Natured 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.