Correlation Between Natural Health and ASOS Plc

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

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

Diversification Opportunities for Natural Health and ASOS Plc

0.27

Correlation Coefficient

Natural Health  ASOS Plc

Modest diversification

The 3 months correlation between Natural and ASOS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trend and ASOS Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASOS Plc and Natural Health 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 Health Trend are associated (or correlated) with ASOS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASOS Plc has no effect on the direction of Natural Health i.e., Natural Health and ASOS Plc go up and down completely randomly.

Pair Corralation between Natural Health and ASOS Plc

Given the investment horizon of 90 days Natural Health Trend is expected to generate 1.35 times more return on investment than ASOS Plc. However, Natural Health is 1.35 times more volatile than ASOS Plc. It trades about 0.47 of its potential returns per unit of risk. ASOS Plc is currently generating about -0.12 per unit of risk. If you would invest  423.00  in Natural Health Trend on October 24, 2024 and sell it today you would earn a total of  88.00  from holding Natural Health Trend or generate 20.8% return on investment over 90 days.

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

Natural Health Trend  vs.  ASOS Plc

Natural Health Trend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Health Trend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ASOS Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASOS Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Natural Health and ASOS Plc

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

The idea behind Natural Health Trend and ASOS Plc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.