Correlation Between Clorox and Nu Skin

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

By analyzing existing cross correlation between The Clorox and Nu Skin Enterprises, you can compare the effects of market volatilities on Clorox and Nu Skin 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 Clorox with a short position of Nu Skin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clorox and Nu Skin.

Diversification Opportunities for Clorox and Nu Skin

0.85

Correlation Coefficient

Clorox  Nu Skin

Very poor diversification

The 3 months correlation between Clorox and NUS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Clorox and Nu Skin Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Skin Enterprises and Clorox 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 The Clorox are associated (or correlated) with Nu Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nu Skin Enterprises has no effect on the direction of Clorox i.e., Clorox and Nu Skin go up and down completely randomly.

Pair Corralation between Clorox and Nu Skin

Considering the 90-day investment horizon The Clorox is expected to generate 0.4 times more return on investment than Nu Skin. However, The Clorox is 2.5 times less risky than Nu Skin. It trades about 0.05 of its potential returns per unit of risk. Nu Skin Enterprises is currently generating about -0.09 per unit of risk. If you would invest  13,915  in The Clorox on September 28, 2024 and sell it today you would earn a total of  2,416  from holding The Clorox or generate 17.37% return on investment over 90 days.

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

The Clorox  vs.  Nu Skin Enterprises

Clorox

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Clorox are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Clorox is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Nu Skin Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nu Skin Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nu Skin is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Clorox and Nu Skin

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

The idea behind The Clorox and Nu Skin Enterprises 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.