Correlation Between Ingredion Incorporated and Herbalife Nutrition

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

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

Diversification Opportunities for Ingredion Incorporated and Herbalife Nutrition

0.81

Correlation Coefficient

Ingredion Incorporated  Herbalife Nutrition

Very poor diversification

The 3 months correlation between Ingredion and Herbalife is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ingredion Incorporated and Herbalife Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herbalife Nutrition and Ingredion Incorporated 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 Ingredion Incorporated are associated (or correlated) with Herbalife Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herbalife Nutrition has no effect on the direction of Ingredion Incorporated i.e., Ingredion Incorporated and Herbalife Nutrition go up and down completely randomly.

Pair Corralation between Ingredion Incorporated and Herbalife Nutrition

Given the investment horizon of 90 days Ingredion Incorporated is expected to under-perform the Herbalife Nutrition. But the stock apears to be less risky and, when comparing its historical volatility, Ingredion Incorporated is 2.0 times less risky than Herbalife Nutrition. The stock trades about -0.09 of its potential returns per unit of risk. The Herbalife Nutrition is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  771.00  in Herbalife Nutrition on September 15, 2024 and sell it today you would lose (23.00) from holding Herbalife Nutrition or give up 2.98% of portfolio value over 90 days.

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

Ingredion Incorporated  vs.  Herbalife Nutrition

Ingredion Incorporated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ingredion Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Ingredion Incorporated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Herbalife Nutrition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Herbalife Nutrition are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Herbalife Nutrition may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ingredion Incorporated and Herbalife Nutrition

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

The idea behind Ingredion Incorporated and Herbalife Nutrition 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.