Correlation Between KMBB34 and Natura Co

Can any of the company-specific risk be diversified away by investing in both KMBB34 and Natura Co 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 KMBB34 and Natura Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KMBB34 and Natura Co Holding, you can compare the effects of market volatilities on KMBB34 and Natura Co 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 KMBB34 with a short position of Natura Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMBB34 and Natura Co.

Diversification Opportunities for KMBB34 and Natura Co

-0.26

Correlation Coefficient

KMBB34  Natura Co

Very good diversification

The 3 months correlation between KMBB34 and Natura is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding KMBB34 and Natura Co Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura Co Holding and KMBB34 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 KMBB34 are associated (or correlated) with Natura Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura Co Holding has no effect on the direction of KMBB34 i.e., KMBB34 and Natura Co go up and down completely randomly.

Pair Corralation between KMBB34 and Natura Co

Assuming the 90 days trading horizon KMBB34 is expected to generate 0.51 times more return on investment than Natura Co. However, KMBB34 is 1.95 times less risky than Natura Co. It trades about 0.1 of its potential returns per unit of risk. Natura Co Holding is currently generating about 0.01 per unit of risk. If you would invest  58,178  in KMBB34 on September 26, 2024 and sell it today you would earn a total of  24,142  from holding KMBB34 or generate 41.5% return on investment over 90 days.

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

KMBB34  vs.  Natura Co Holding

KMBB34

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KMBB34 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, KMBB34 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Natura Co Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natura Co Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Natura Co is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KMBB34 and Natura Co

The main advantage of trading using opposite KMBB34 and Natura Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KMBB34 position performs unexpectedly, Natura Co 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 Natura Co will offset losses from the drop in Natura Co's long position.

The idea behind KMBB34 and Natura Co Holding 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.