Correlation Between Natural Health and Yamaha

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

Diversification Opportunities for Natural Health and Yamaha

0.43

Correlation Coefficient

Natural Health  Yamaha

Very weak diversification

The 3 months correlation between Natural and Yamaha is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and Yamaha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha has no effect on the direction of Natural Health i.e., Natural Health and Yamaha go up and down completely randomly.

Pair Corralation between Natural Health and Yamaha

Assuming the 90 days trading horizon Natural Health Trends is expected to generate 1.68 times more return on investment than Yamaha. However, Natural Health is 1.68 times more volatile than Yamaha. It trades about 0.1 of its potential returns per unit of risk. Yamaha is currently generating about 0.11 per unit of risk. If you would invest  400.00  in Natural Health Trends on December 29, 2024 and sell it today you would earn a total of  64.00  from holding Natural Health Trends or generate 16.0% return on investment over 90 days.

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

Natural Health Trends  vs.  Yamaha

Natural Health Trends

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Health Trends are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Natural Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Yamaha

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yamaha are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Yamaha may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Natural Health and Yamaha

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

The idea behind Natural Health Trends and Yamaha 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.