Correlation Between Argan and Natural Health

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

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

Diversification Opportunities for Argan and Natural Health

-0.32

Correlation Coefficient

Argan  Natural Health

Very good diversification

The 3 months correlation between Argan and Natural is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Argan Inc 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 Argan 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 Argan Inc 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 Argan i.e., Argan and Natural Health go up and down completely randomly.

Pair Corralation between Argan and Natural Health

Considering the 90-day investment horizon Argan Inc is expected to generate 1.65 times more return on investment than Natural Health. However, Argan is 1.65 times more volatile than Natural Health Trend. It trades about 0.17 of its potential returns per unit of risk. Natural Health Trend is currently generating about -0.02 per unit of risk. If you would invest  16,508  in Argan Inc on May 5, 2025 and sell it today you would earn a total of  6,019  from holding Argan Inc or generate 36.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Argan Inc  vs.  Natural Health Trend

Argan Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Argan showed solid returns over the last few months and may actually be approaching a breakup point.

Natural Health Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Health Trend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Natural Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Argan and Natural Health

The main advantage of trading using opposite Argan and Natural Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argan 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.

The idea behind Argan Inc 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.