Correlation Between Natures Sunshine and Lancaster Colony

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

Diversification Opportunities for Natures Sunshine and Lancaster Colony

0.04

Correlation Coefficient

Natures Sunshine  Lancaster Colony

Significant diversification

The 3 months correlation between Natures and Lancaster is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Natures Sunshine Products and Lancaster Colony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancaster Colony 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 Lancaster Colony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancaster Colony has no effect on the direction of Natures Sunshine i.e., Natures Sunshine and Lancaster Colony go up and down completely randomly.

Pair Corralation between Natures Sunshine and Lancaster Colony

Given the investment horizon of 90 days Natures Sunshine Products is expected to under-perform the Lancaster Colony. In addition to that, Natures Sunshine is 1.22 times more volatile than Lancaster Colony. It trades about -0.11 of its total potential returns per unit of risk. Lancaster Colony is currently generating about 0.02 per unit of volatility. If you would invest  17,228  in Lancaster Colony on December 30, 2024 and sell it today you would earn a total of  251.00  from holding Lancaster Colony or generate 1.46% return on investment over 90 days.

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

Natures Sunshine Products  vs.  Lancaster Colony

Natures Sunshine Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natures Sunshine Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic 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.

Lancaster Colony

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Natures Sunshine and Lancaster Colony

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

The idea behind Natures Sunshine Products and Lancaster Colony 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.