Correlation Between Natural Health and AECOM

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

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

Diversification Opportunities for Natural Health and AECOM

-0.43

Correlation Coefficient

Natural Health  AECOM

Very good diversification

The 3 months correlation between Natural and AECOM is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and AECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM and Natural Health 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 Natural Health Trends are associated (or correlated) with AECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM has no effect on the direction of Natural Health i.e., Natural Health and AECOM go up and down completely randomly.

Pair Corralation between Natural Health and AECOM

Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the AECOM. In addition to that, Natural Health is 1.37 times more volatile than AECOM. It trades about -0.07 of its total potential returns per unit of risk. AECOM is currently generating about 0.17 per unit of volatility. If you would invest  9,028  in AECOM on September 3, 2024 and sell it today you would earn a total of  1,972  from holding AECOM or generate 21.84% return on investment over 90 days.

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

Natural Health Trends  vs.  AECOM

Natural Health Trends

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Health Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

AECOM

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AECOM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natural Health and AECOM

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

The idea behind Natural Health Trends and AECOM 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..