Correlation Between Natura Co and Yatsen Holding

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

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

Diversification Opportunities for Natura Co and Yatsen Holding

0.51

Correlation Coefficient

Natura Co  Yatsen Holding

Very weak diversification

The 3 months correlation between Natura and Yatsen is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and Yatsen Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yatsen Holding and Natura Co 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 Natura Co Holding are associated (or correlated) with Yatsen Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yatsen Holding has no effect on the direction of Natura Co i.e., Natura Co and Yatsen Holding go up and down completely randomly.

Pair Corralation between Natura Co and Yatsen Holding

Given the investment horizon of 90 days Natura Co is expected to generate 4.11 times less return on investment than Yatsen Holding. But when comparing it to its historical volatility, Natura Co Holding is 1.79 times less risky than Yatsen Holding. It trades about 0.06 of its potential returns per unit of risk. Yatsen Holding is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  298.00  in Yatsen Holding on February 3, 2024 and sell it today you would earn a total of  123.00  from holding Yatsen Holding or generate 41.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.78%
Values	Daily Returns

Natura Co Holding  vs.  Yatsen Holding

Natura Co Holding

Risk-Adjusted Performance

0 of 100

Insignificant

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 very weak fundamental indicators, Natura Co may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Yatsen Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yatsen Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Yatsen Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natura Co and Yatsen Holding

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

The idea behind Natura Co Holding and Yatsen 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 Stocks Directory module to find actively traded stocks across global markets.