Correlation Between Natural Health and Monotaro

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

Diversification Opportunities for Natural Health and Monotaro

0.18

Correlation Coefficient

Natural Health  Monotaro

Average diversification

The 3 months correlation between Natural and Monotaro is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trend and Monotaro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monotaro 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 Monotaro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monotaro has no effect on the direction of Natural Health i.e., Natural Health and Monotaro go up and down completely randomly.

Pair Corralation between Natural Health and Monotaro

Given the investment horizon of 90 days Natural Health Trend is expected to generate 1.36 times more return on investment than Monotaro. However, Natural Health is 1.36 times more volatile than Monotaro Co. It trades about -0.02 of its potential returns per unit of risk. Monotaro Co is currently generating about -0.04 per unit of risk. If you would invest  521.00  in Natural Health Trend on December 1, 2024 and sell it today you would lose (35.00) from holding Natural Health Trend or give up 6.72% of portfolio value over 90 days.

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

Natural Health Trend  vs.  Monotaro Co

Natural Health Trend

Risk-Adjusted Performance

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 rather sound basic indicators, Natural Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Monotaro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monotaro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Monotaro is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Natural Health and Monotaro

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

The idea behind Natural Health Trend and Monotaro Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.