Correlation Between CVR Partners and Nature Wood

Can any of the company-specific risk be diversified away by investing in both CVR Partners and Nature Wood 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 CVR Partners and Nature Wood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVR Partners LP and Nature Wood Group, you can compare the effects of market volatilities on CVR Partners and Nature Wood 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 CVR Partners with a short position of Nature Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVR Partners and Nature Wood.

Diversification Opportunities for CVR Partners and Nature Wood

-0.03

Correlation Coefficient

CVR Partners  Nature Wood

Good diversification

The 3 months correlation between CVR and Nature is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding CVR Partners LP and Nature Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature Wood Group and CVR Partners 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 CVR Partners LP are associated (or correlated) with Nature Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature Wood Group has no effect on the direction of CVR Partners i.e., CVR Partners and Nature Wood go up and down completely randomly.

Pair Corralation between CVR Partners and Nature Wood

Considering the 90-day investment horizon CVR Partners is expected to generate 6.49 times less return on investment than Nature Wood. But when comparing it to its historical volatility, CVR Partners LP is 3.61 times less risky than Nature Wood. It trades about 0.04 of its potential returns per unit of risk. Nature Wood Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Nature Wood Group on December 27, 2024 and sell it today you would earn a total of  16.00  from holding Nature Wood Group or generate 13.56% return on investment over 90 days.

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

CVR Partners LP  vs.  Nature Wood Group

CVR Partners LP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Partners LP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CVR Partners is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Nature Wood Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nature Wood Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Nature Wood disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVR Partners and Nature Wood

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

The idea behind CVR Partners LP and Nature Wood Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.