Correlation Between Henkel AG and Natura Co

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

By analyzing existing cross correlation between Henkel AG Co and Natura Co Holding, you can compare the effects of market volatilities on Henkel AG and Natura Co 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 Henkel AG with a short position of Natura Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henkel AG and Natura Co.

Diversification Opportunities for Henkel AG and Natura Co

-0.34

Correlation Coefficient

Henkel AG  Natura Co

Very good diversification

The 3 months correlation between Henkel and Natura is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Henkel AG Co and Natura Co Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura Co Holding and Henkel AG 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 Henkel AG Co are associated (or correlated) with Natura Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura Co Holding has no effect on the direction of Henkel AG i.e., Henkel AG and Natura Co go up and down completely randomly.

Pair Corralation between Henkel AG and Natura Co

If you would invest  752.00  in Natura Co Holding on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Natura Co Holding or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Henkel AG Co  vs.  Natura Co Holding

Henkel AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henkel AG Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Henkel AG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Natura Co Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natura Co Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Natura Co is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Henkel AG and Natura Co

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

The idea behind Henkel AG Co and Natura Co Holding 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.