Correlation Between Natural Health and WuXi AppTec

Can any of the company-specific risk be diversified away by investing in both Natural Health and WuXi AppTec 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 WuXi AppTec 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 WuXi AppTec Co, you can compare the effects of market volatilities on Natural Health and WuXi AppTec 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 WuXi AppTec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Health and WuXi AppTec.

Diversification Opportunities for Natural Health and WuXi AppTec

-0.57

Correlation Coefficient

Natural Health  WuXi AppTec

Excellent diversification

The 3 months correlation between Natural and WuXi is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and WuXi AppTec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi AppTec 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 WuXi AppTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi AppTec has no effect on the direction of Natural Health i.e., Natural Health and WuXi AppTec go up and down completely randomly.

Pair Corralation between Natural Health and WuXi AppTec

Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the WuXi AppTec. But the stock apears to be less risky and, when comparing its historical volatility, Natural Health Trends is 2.5 times less risky than WuXi AppTec. The stock trades about -0.15 of its potential returns per unit of risk. The WuXi AppTec Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  426.00  in WuXi AppTec Co on September 13, 2024 and sell it today you would earn a total of  259.00  from holding WuXi AppTec Co or generate 60.8% return on investment over 90 days.

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

Natural Health Trends  vs.  WuXi AppTec Co

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

WuXi AppTec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WuXi AppTec Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WuXi AppTec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natural Health and WuXi AppTec

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

The idea behind Natural Health Trends and WuXi AppTec Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.