Correlation Between Natural Alternatives and Sphere Entertainment

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

Diversification Opportunities for Natural Alternatives and Sphere Entertainment

0.78

Correlation Coefficient

Natural Alternatives  Sphere Entertainment

Poor diversification

The 3 months correlation between Natural and Sphere is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Natural Alternatives Internati and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Natural Alternatives i.e., Natural Alternatives and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Natural Alternatives and Sphere Entertainment

Given the investment horizon of 90 days Natural Alternatives International is expected to under-perform the Sphere Entertainment. In addition to that, Natural Alternatives is 1.01 times more volatile than Sphere Entertainment Co. It trades about -0.1 of its total potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.09 per unit of volatility. If you would invest  4,015  in Sphere Entertainment Co on December 28, 2024 and sell it today you would lose (692.00) from holding Sphere Entertainment Co or give up 17.24% of portfolio value over 90 days.

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

Natural Alternatives Internati  vs.  Sphere Entertainment Co

Natural Alternatives

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Sphere Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Natural Alternatives and Sphere Entertainment

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

The idea behind Natural Alternatives International and Sphere Entertainment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.