Correlation Between Clearwater Paper and Natural Health

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Can any of the company-specific risk be diversified away by investing in both Clearwater Paper and Natural Health 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 Clearwater Paper and Natural Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearwater Paper and Natural Health Trend, you can compare the effects of market volatilities on Clearwater Paper and Natural Health 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 Clearwater Paper with a short position of Natural Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearwater Paper and Natural Health.

Diversification Opportunities for Clearwater Paper and Natural Health

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Clearwater and Natural is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Clearwater Paper and Natural Health Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Health Trend and Clearwater Paper 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 Clearwater Paper are associated (or correlated) with Natural Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Health Trend has no effect on the direction of Clearwater Paper i.e., Clearwater Paper and Natural Health go up and down completely randomly.

Pair Corralation between Clearwater Paper and Natural Health

Considering the 90-day investment horizon Clearwater Paper is expected to generate 0.56 times more return on investment than Natural Health. However, Clearwater Paper is 1.78 times less risky than Natural Health. It trades about 0.04 of its potential returns per unit of risk. Natural Health Trend is currently generating about -0.03 per unit of risk. If you would invest  3,853  in Clearwater Paper on September 8, 2022 and sell it today you would earn a total of  49.00  from holding Clearwater Paper or generate 1.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Clearwater Paper  vs.  Natural Health Trend

 Performance (%) 
       Timeline  
Clearwater Paper 
Clearwater Performance
0 of 100
Over the last 90 days Clearwater Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Clearwater Paper is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Clearwater Price Channel

Natural Health Trend 
Natural Performance
0 of 100
Over the last 90 days Natural Health Trend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Natural Health is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Natural Price Channel

Clearwater Paper and Natural Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Clearwater Paper and Natural Health

The main advantage of trading using opposite Clearwater Paper and Natural Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearwater Paper position performs unexpectedly, Natural Health 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 Natural Health will offset losses from the drop in Natural Health's long position.
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The idea behind Clearwater Paper and Natural Health Trend 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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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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