Correlation Between Natural Health and Inter Parfums

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

Diversification Opportunities for Natural Health and Inter Parfums

-0.51

Correlation Coefficient

Natural Health  Inter Parfums

Excellent diversification

The 3 months correlation between Natural and Inter is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trend and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums 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 Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Natural Health i.e., Natural Health and Inter Parfums go up and down completely randomly.

Pair Corralation between Natural Health and Inter Parfums

Given the investment horizon of 90 days Natural Health is expected to generate 1.29 times less return on investment than Inter Parfums. In addition to that, Natural Health is 1.17 times more volatile than Inter Parfums. It trades about 0.02 of its total potential returns per unit of risk. Inter Parfums is currently generating about 0.03 per unit of volatility. If you would invest  10,983  in Inter Parfums on October 1, 2024 and sell it today you would earn a total of  2,123  from holding Inter Parfums or generate 19.33% return on investment over 90 days.

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

Natural Health Trend  vs.  Inter Parfums

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Inter Parfums

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Inter Parfums is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Natural Health and Inter Parfums

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

The idea behind Natural Health Trend and Inter Parfums 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.