Correlation Between United States and Natura Co

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

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

Diversification Opportunities for United States and Natura Co

-0.08

Correlation Coefficient

United States  Natura Co

Good diversification

The 3 months correlation between United and Natura is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Natura Co go up and down completely randomly.

Pair Corralation between United States and Natura Co

Assuming the 90 days trading horizon United States Steel is expected to under-perform the Natura Co. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 1.47 times less risky than Natura Co. The stock trades about -0.25 of its potential returns per unit of risk. The Natura Co Holding is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,383  in Natura Co Holding on September 21, 2024 and sell it today you would lose (71.00) from holding Natura Co Holding or give up 5.13% of portfolio value over 90 days.

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

United States Steel  vs.  Natura Co Holding

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, United States is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 comparatively stable basic indicators, Natura Co is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United States and Natura Co

The main advantage of trading using opposite United States and Natura Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.