Correlation Between Real Good and Natures Sunshine

Can any of the company-specific risk be diversified away by investing in both Real Good and Natures Sunshine 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 Real Good and Natures Sunshine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Real Good Food and Natures Sunshine Products, you can compare the effects of market volatilities on Real Good and Natures Sunshine 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 Real Good with a short position of Natures Sunshine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Good and Natures Sunshine.

Diversification Opportunities for Real Good and Natures Sunshine

-0.05

Correlation Coefficient

Real Good  Natures Sunshine

Good diversification

The 3 months correlation between Real and Natures is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Real Good Food and Natures Sunshine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natures Sunshine Products and Real Good 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 Real Good Food are associated (or correlated) with Natures Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natures Sunshine Products has no effect on the direction of Real Good i.e., Real Good and Natures Sunshine go up and down completely randomly.

Pair Corralation between Real Good and Natures Sunshine

Considering the 90-day investment horizon Real Good Food is expected to generate 46.08 times more return on investment than Natures Sunshine. However, Real Good is 46.08 times more volatile than Natures Sunshine Products. It trades about 0.14 of its potential returns per unit of risk. Natures Sunshine Products is currently generating about 0.06 per unit of risk. If you would invest  31.00  in Real Good Food on October 8, 2024 and sell it today you would lose (1.00) from holding Real Good Food or give up 3.23% of portfolio value over 90 days.

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

Real Good Food  vs.  Natures Sunshine Products

Real Good Food

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Real Good Food are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Real Good reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak basic indicators, Natures Sunshine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Real Good and Natures Sunshine

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

The idea behind Real Good Food and Natures Sunshine Products 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.