Correlation Between Natures Sunshine and Bellring Brands

Can any of the company-specific risk be diversified away by investing in both Natures Sunshine and Bellring Brands 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 Natures Sunshine and Bellring Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Natures Sunshine Products and Bellring Brands LLC, you can compare the effects of market volatilities on Natures Sunshine and Bellring Brands 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 Natures Sunshine with a short position of Bellring Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natures Sunshine and Bellring Brands.

Diversification Opportunities for Natures Sunshine and Bellring Brands

0.72

Correlation Coefficient

Natures Sunshine  Bellring Brands

Poor diversification

The 3 months correlation between Natures and Bellring is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Natures Sunshine Products and Bellring Brands LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellring Brands LLC and Natures Sunshine 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 Natures Sunshine Products are associated (or correlated) with Bellring Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellring Brands LLC has no effect on the direction of Natures Sunshine i.e., Natures Sunshine and Bellring Brands go up and down completely randomly.

Pair Corralation between Natures Sunshine and Bellring Brands

Given the investment horizon of 90 days Natures Sunshine is expected to generate 1.72 times less return on investment than Bellring Brands. In addition to that, Natures Sunshine is 2.85 times more volatile than Bellring Brands LLC. It trades about 0.09 of its total potential returns per unit of risk. Bellring Brands LLC is currently generating about 0.44 per unit of volatility. If you would invest  5,593  in Bellring Brands LLC on August 30, 2024 and sell it today you would earn a total of  2,123  from holding Bellring Brands LLC or generate 37.96% return on investment over 90 days.

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

Natures Sunshine Products  vs.  Bellring Brands LLC

Natures Sunshine Products

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natures Sunshine Products are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Natures Sunshine reported solid returns over the last few months and may actually be approaching a breakup point.

Bellring Brands LLC

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bellring Brands LLC are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, Bellring Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natures Sunshine and Bellring Brands

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

The idea behind Natures Sunshine Products and Bellring Brands LLC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.