Correlation Between Natural Hlth and EBay

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

Diversification Opportunities for Natural Hlth and EBay

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Natural and EBay is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Natural Hlth Trd and EBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBay Inc and Natural Hlth 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 Hlth Trd are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBay Inc has no effect on the direction of Natural Hlth i.e., Natural Hlth and EBay go up and down completely randomly.

Pair Corralation between Natural Hlth and EBay

Given the investment horizon of 90 days Natural Hlth Trd is expected to under-perform the EBay. In addition to that, Natural Hlth is 1.31 times more volatile than EBay Inc. It trades about -0.26 of its total potential returns per unit of risk. EBay Inc is currently generating about -0.01 per unit of volatility. If you would invest  4,626  in EBay Inc on March 27, 2022 and sell it today you would lose (59.00)  from holding EBay Inc or give up 1.28% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Natural Hlth Trd  vs.  EBay Inc

 Performance (%) 
      Timeline 
Natural Hlth Trd 
Natural Performance
0 of 100
Over the last 90 days Natural Hlth Trd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.16
Payout Ratio
0.0868
Last Split Factor
1:100
Forward Annual Dividend Rate
0.8
Dividend Date
2022-05-27
Ex Dividend Date
2022-05-16
Last Split Date
2003-03-19

Natural Price Channel

EBay Inc 
EBay Performance
0 of 100
Over the last 90 days EBay Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0208
Payout Ratio
0.2
Last Split Factor
2376:1000
Forward Annual Dividend Rate
0.88
Dividend Date
2022-06-17
Ex Dividend Date
2022-05-31
Last Split Date
2015-07-20

EBay Price Channel

Natural Hlth and EBay Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Natural Hlth and EBay

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

Natural Hlth Trd

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Natural Hlth as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Natural Hlth's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Natural Hlth's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Natural Hlth Trd.
The idea behind Natural Hlth Trd and EBay Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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