Correlation Between Natural Health and IMedia Brands

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

By analyzing existing cross correlation between Natural Health Trend and IMedia Brands, you can compare the effects of market volatilities on Natural Health and IMedia Brands 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 IMedia Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Health and IMedia Brands.

Diversification Opportunities for Natural Health and IMedia Brands

-0.68

Correlation Coefficient

Natural Health  IMedia Brands

Excellent diversification

The 3 months correlation between Natural and IMedia is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trend and IMedia Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMedia Brands 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 Trend are associated (or correlated) with IMedia Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMedia Brands has no effect on the direction of Natural Health i.e., Natural Health and IMedia Brands go up and down completely randomly.

Pair Corralation between Natural Health and IMedia Brands

Given the investment horizon of 90 days Natural Health Trend is expected to generate 0.22 times more return on investment than IMedia Brands. However, Natural Health Trend is 4.64 times less risky than IMedia Brands. It trades about 0.03 of its potential returns per unit of risk. IMedia Brands is currently generating about -0.09 per unit of risk. If you would invest  543.00  in Natural Health Trend on January 24, 2024 and sell it today you would earn a total of  121.00  from holding Natural Health Trend or generate 22.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	68.69%
Values	Daily Returns

Natural Health Trend  vs.  IMedia Brands

Natural Health Trend

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Health Trend are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Natural Health may actually be approaching a critical reversion point that can send shares even higher in May 2024.

IMedia Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IMedia Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, IMedia Brands is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Natural Health and IMedia Brands

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

The idea behind Natural Health Trend and IMedia Brands 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.