Correlation Between Natural Health and Science Applications

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

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

Diversification Opportunities for Natural Health and Science Applications

-0.29

Correlation Coefficient

Natural Health  Science Applications

Very good diversification

The 3 months correlation between Natural and Science is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications and Natural Health 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 Natural Health Trends are associated (or correlated) with Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Natural Health i.e., Natural Health and Science Applications go up and down completely randomly.

Pair Corralation between Natural Health and Science Applications

Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the Science Applications. In addition to that, Natural Health is 1.03 times more volatile than Science Applications International. It trades about -0.06 of its total potential returns per unit of risk. Science Applications International is currently generating about 0.01 per unit of volatility. If you would invest  11,567  in Science Applications International on August 31, 2024 and sell it today you would lose (67.00) from holding Science Applications International or give up 0.58% of portfolio value over 90 days.

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

Natural Health Trends  vs.  Science Applications Internati

Natural Health Trends

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Health Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Science Applications 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 Natural Health and Science Applications

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

The idea behind Natural Health Trends and Science Applications 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.