Correlation Between United Guardian and Herbalife Nutrition

Can any of the company-specific risk be diversified away by investing in both United Guardian and Herbalife Nutrition 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 United Guardian and Herbalife Nutrition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Guardian and Herbalife Nutrition, you can compare the effects of market volatilities on United Guardian and Herbalife Nutrition 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 United Guardian with a short position of Herbalife Nutrition. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Guardian and Herbalife Nutrition.

Diversification Opportunities for United Guardian and Herbalife Nutrition

-0.48

Correlation Coefficient

United Guardian  Herbalife Nutrition

Very good diversification

The 3 months correlation between United and Herbalife is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding United Guardian and Herbalife Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herbalife Nutrition and United Guardian 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 United Guardian are associated (or correlated) with Herbalife Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herbalife Nutrition has no effect on the direction of United Guardian i.e., United Guardian and Herbalife Nutrition go up and down completely randomly.

Pair Corralation between United Guardian and Herbalife Nutrition

Allowing for the 90-day total investment horizon United Guardian is expected to generate 65.34 times less return on investment than Herbalife Nutrition. But when comparing it to its historical volatility, United Guardian is 3.03 times less risky than Herbalife Nutrition. It trades about 0.0 of its potential returns per unit of risk. Herbalife Nutrition is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  672.00  in Herbalife Nutrition on December 29, 2024 and sell it today you would earn a total of  185.00  from holding Herbalife Nutrition or generate 27.53% return on investment over 90 days.

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

United Guardian  vs.  Herbalife Nutrition

United Guardian

Risk-Adjusted Performance

Very Weak

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

Herbalife Nutrition

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herbalife Nutrition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Herbalife Nutrition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Guardian and Herbalife Nutrition

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

The idea behind United Guardian and Herbalife Nutrition 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.