Correlation Between Natures Sunshine and Lamb Weston

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

Diversification Opportunities for Natures Sunshine and Lamb Weston

0.5

Correlation Coefficient

Natures Sunshine  Lamb Weston

Very weak diversification

The 3 months correlation between Natures and Lamb is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Natures Sunshine Products and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings 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 Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Natures Sunshine i.e., Natures Sunshine and Lamb Weston go up and down completely randomly.

Pair Corralation between Natures Sunshine and Lamb Weston

Given the investment horizon of 90 days Natures Sunshine Products is expected to generate 2.01 times more return on investment than Lamb Weston. However, Natures Sunshine is 2.01 times more volatile than Lamb Weston Holdings. It trades about 0.13 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about 0.06 per unit of risk. If you would invest  1,295  in Natures Sunshine Products on September 19, 2024 and sell it today you would earn a total of  249.00  from holding Natures Sunshine Products or generate 19.23% return on investment over 90 days.

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

Natures Sunshine Products  vs.  Lamb Weston Holdings

Natures Sunshine Products

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Natures Sunshine Products are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Natures Sunshine reported solid returns over the last few months and may actually be approaching a breakup point.

Lamb Weston Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lamb Weston showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natures Sunshine and Lamb Weston

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

The idea behind Natures Sunshine Products and Lamb Weston Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.