Correlation Between Vulcan Energy and Natera

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

By analyzing existing cross correlation between Vulcan Energy Resources and Natera Inc, you can compare the effects of market volatilities on Vulcan Energy and Natera 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 Vulcan Energy with a short position of Natera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Energy and Natera.

Diversification Opportunities for Vulcan Energy and Natera

0.84

Correlation Coefficient

Vulcan Energy  Natera

Very poor diversification

The 3 months correlation between Vulcan and Natera is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Energy Resources and Natera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natera Inc and Vulcan Energy 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 Vulcan Energy Resources are associated (or correlated) with Natera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natera Inc has no effect on the direction of Vulcan Energy i.e., Vulcan Energy and Natera go up and down completely randomly.

Pair Corralation between Vulcan Energy and Natera

Assuming the 90 days horizon Vulcan Energy Resources is expected to under-perform the Natera. In addition to that, Vulcan Energy is 2.85 times more volatile than Natera Inc. It trades about -0.11 of its total potential returns per unit of risk. Natera Inc is currently generating about -0.05 per unit of volatility. If you would invest  16,726  in Natera Inc on September 23, 2024 and sell it today you would lose (538.00) from holding Natera Inc or give up 3.22% of portfolio value over 90 days.

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

Vulcan Energy Resources  vs.  Natera Inc

Vulcan Energy Resources

Risk-Adjusted Performance

7 of 100

OK

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

Natera Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Energy and Natera

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

The idea behind Vulcan Energy Resources and Natera Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.