Correlation Between Natural Alternatives and CVW CleanTech

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

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

Diversification Opportunities for Natural Alternatives and CVW CleanTech

0.06

Correlation Coefficient

Natural Alternatives  CVW CleanTech

Significant diversification

The 3 months correlation between Natural and CVW is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Natural Alternatives Internati and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech and Natural Alternatives 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 Alternatives International are associated (or correlated) with CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Natural Alternatives i.e., Natural Alternatives and CVW CleanTech go up and down completely randomly.

Pair Corralation between Natural Alternatives and CVW CleanTech

Given the investment horizon of 90 days Natural Alternatives International is expected to generate 0.4 times more return on investment than CVW CleanTech. However, Natural Alternatives International is 2.51 times less risky than CVW CleanTech. It trades about 0.01 of its potential returns per unit of risk. CVW CleanTech is currently generating about -0.04 per unit of risk. If you would invest  428.00  in Natural Alternatives International on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Natural Alternatives International or generate 0.23% return on investment over 90 days.

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

Natural Alternatives Internati  vs.  CVW CleanTech

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

CVW CleanTech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CVW CleanTech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Natural Alternatives and CVW CleanTech

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

The idea behind Natural Alternatives International and CVW CleanTech 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.