Correlation Between United Guardian and Natural Alternatives

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

By analyzing existing cross correlation between United Guardian and Natural Alternatives International, you can compare the effects of market volatilities on United Guardian and Natural Alternatives 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 Natural Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Guardian and Natural Alternatives.

Diversification Opportunities for United Guardian and Natural Alternatives

0.67

Correlation Coefficient

United Guardian  Natural Alternatives

Poor diversification

The 3 months correlation between United and Natural is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding United Guardian and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives 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 Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of United Guardian i.e., United Guardian and Natural Alternatives go up and down completely randomly.

Pair Corralation between United Guardian and Natural Alternatives

Allowing for the 90-day total investment horizon United Guardian is expected to under-perform the Natural Alternatives. But the stock apears to be less risky and, when comparing its historical volatility, United Guardian is 1.1 times less risky than Natural Alternatives. The stock trades about -0.14 of its potential returns per unit of risk. The Natural Alternatives International is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  621.00  in Natural Alternatives International on September 13, 2024 and sell it today you would lose (199.00) from holding Natural Alternatives International or give up 32.05% of portfolio value over 90 days.

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

United Guardian  vs.  Natural Alternatives Internati

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with United Guardian and Natural Alternatives

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

The idea behind United Guardian and Natural Alternatives International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.