Correlation Between HERBALIFE and FEMALE HEALTH

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

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

Diversification Opportunities for HERBALIFE and FEMALE HEALTH

-0.67

Correlation Coefficient

HERBALIFE  FEMALE HEALTH

Excellent diversification

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

Pair Corralation between HERBALIFE and FEMALE HEALTH

Assuming the 90 days trading horizon HERBALIFE is expected to generate 0.77 times more return on investment than FEMALE HEALTH. However, HERBALIFE is 1.3 times less risky than FEMALE HEALTH. It trades about 0.06 of its potential returns per unit of risk. FEMALE HEALTH is currently generating about 0.0 per unit of risk. If you would invest  669.00  in HERBALIFE on September 16, 2024 and sell it today you would earn a total of  58.00  from holding HERBALIFE or generate 8.67% return on investment over 90 days.

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

HERBALIFE  vs.  FEMALE HEALTH

HERBALIFE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HERBALIFE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, HERBALIFE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FEMALE HEALTH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEMALE HEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FEMALE HEALTH is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HERBALIFE and FEMALE HEALTH

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

The idea behind HERBALIFE and FEMALE HEALTH 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.