Correlation Between Natural Grocers and Dingdong ADR

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

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

Diversification Opportunities for Natural Grocers and Dingdong ADR

0.41

Correlation Coefficient

Natural Grocers  Dingdong ADR

Very weak diversification

The 3 months correlation between Natural and Dingdong is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Natural Grocers by and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR and Natural Grocers 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 Grocers by are associated (or correlated) with Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Natural Grocers i.e., Natural Grocers and Dingdong ADR go up and down completely randomly.

Pair Corralation between Natural Grocers and Dingdong ADR

Given the investment horizon of 90 days Natural Grocers is expected to generate 1.01 times less return on investment than Dingdong ADR. But when comparing it to its historical volatility, Natural Grocers by is 1.31 times less risky than Dingdong ADR. It trades about 0.21 of its potential returns per unit of risk. Dingdong ADR is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  251.00  in Dingdong ADR on September 7, 2024 and sell it today you would earn a total of  156.00  from holding Dingdong ADR or generate 62.15% return on investment over 90 days.

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

Natural Grocers by  vs.  Dingdong ADR

Natural Grocers by

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Grocers by are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Natural Grocers exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dingdong ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dingdong ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Dingdong ADR disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natural Grocers and Dingdong ADR

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

The idea behind Natural Grocers by and Dingdong ADR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.