Correlation Between Natural Health and Redbubble

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

Diversification Opportunities for Natural Health and Redbubble

0.45

Correlation Coefficient

Natural Health  Redbubble

Very weak diversification

The 3 months correlation between Natural and Redbubble is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trend and Redbubble Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redbubble Limited 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 Redbubble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redbubble Limited has no effect on the direction of Natural Health i.e., Natural Health and Redbubble go up and down completely randomly.

Pair Corralation between Natural Health and Redbubble

Given the investment horizon of 90 days Natural Health is expected to generate 9.16 times less return on investment than Redbubble. But when comparing it to its historical volatility, Natural Health Trend is 3.4 times less risky than Redbubble. It trades about 0.01 of its potential returns per unit of risk. Redbubble Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Redbubble Limited on September 12, 2024 and sell it today you would lose (8.00) from holding Redbubble Limited or give up 28.57% of portfolio value over 90 days.

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

Natural Health Trend  vs.  Redbubble Limited

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.

Redbubble Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redbubble Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Redbubble is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Natural Health and Redbubble

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

The idea behind Natural Health Trend and Redbubble Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.