Correlation Between Borealis Foods and Natural Alternatives

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

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

Diversification Opportunities for Borealis Foods and Natural Alternatives

-0.11

Correlation Coefficient

Borealis Foods  Natural Alternatives

Good diversification

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

Pair Corralation between Borealis Foods and Natural Alternatives

Assuming the 90 days horizon Borealis Foods is expected to generate 3.95 times more return on investment than Natural Alternatives. However, Borealis Foods is 3.95 times more volatile than Natural Alternatives International. It trades about 0.12 of its potential returns per unit of risk. Natural Alternatives International is currently generating about -0.02 per unit of risk. If you would invest  7.11  in Borealis Foods on January 29, 2024 and sell it today you would earn a total of  3.89  from holding Borealis Foods or generate 54.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	18.39%
Values	Daily Returns

Borealis Foods  vs.  Natural Alternatives Internati

Borealis Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Borealis Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Borealis Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Natural Alternatives is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Borealis Foods and Natural Alternatives

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

The idea behind Borealis Foods and Natural Alternatives International 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.